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Study: Card issuers squeamish about bringing in new customers

Matt Schulz

card_issuers.jpgFrightened off by tough economic times, most credit card issuers are scaling back their pursuit of new customers because they just aren’t worth the risk, according to a new study.

The report from Javelin Strategy & Research, a San Francisco Bay Area-based firm, says that nearly 70 percent of issuers see acquiring new cardholders as too risky. A slightly smaller percentage of issuers are also reducing lines of credit for current cardholders, all in direct response to the nation’s current economic struggles.

In the report, Javelin says, “Even at some institutions that haven’t suffered losses directly attributable to the economic downturn, cardholder acquisition and the entire makeup of the credit card portfolio is being altered based on pressures felt at the institutional level.” The report also says issuers have given up on the idea that “that risk is lowered by diluting it over a larger number of cardholders.”

This means you should expect to see fewer credit card offers clogging up your mailbox, and the ones you do will likely offer up lower limits.

The study also examined cardholders’ reactions to worsening economic conditions. Some of those findings include:

  • 37 percent of consumers say they are using their credit cards less.
  • 28 percent of those surveyed say their ability to pay off their credit card balance has become more difficult.
  • 45 percent of those surveyed say their ability to contribute to savings has decreased. That includes more than half of consumers in the 35-64 age group.
  • One out of every three consumers says they are buying fewer basic goods.
  • 57 percent of those surveyed say they are more careful about how often they eat out at restaurants.
  • 46 percent of consumers say they are shopping more at big-box, discount superstores like Wal-Mart and Target.

In addition, Javelin speculates in the report that “as the economy continues to sway, consumers will feel more helpless and will likely turn to credit cards as a source of financing for even more basic purchases.”

That change doesn’t appear to have happened yet. (We’ll learn more next week when the Federal Reserve releases its G.19 report on consumer spending, which includes figures on credit card spending for June.) However, when people do decide to turn to their cards, they might just find that issuers aren’t as accommodating as they used to be.

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  • eclewis

    Mr. Schultz,
    Does this mean these card issuers are actually considering (dare we say evaluating credit worthiness) the RISK involved now versus dealing out credit cards like potato chips? Are they now going to limit the offers to those actually worth the RISK versus anyone they can find? It is amazing how these card issuers have recoiled so dramatically from one side to the other. They want the juicy profits but none of the risk or expendatures from actually performing due diligence on the individuals to whom they offer credit.
    “The report from Javelin Strategy & Research, a San Francisco Bay Area-based firm, says that nearly 70 percent of issuers see acquiring new cardholders as too risky. A slightly smaller percentage of issuers are also reducing lines of credit for current cardholders, all in direct response to the nation’s current economic struggles.”
    Regards,
    EC

  • That’s definitely what this study is saying. And while its hard to know for sure, the conventional wisdom sure seems to be that that’s happening. Anecdotally, I know that my wife and I have received a lot fewer credit card offers in the mail in recent months than we had previously, when it seemed like we’d get several a day.
    Either way, it’s worth watching, and we’ll keep covering it here at CreditCards.com.