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August 13, 2010

American credit card spend highest for 20 years

Americans have generated the highest spend on their credit cards year-on-year for more than 20 years, according to Mail Monitor, the credit card tracking service from market research company Synovate.

By Verdict Staff

Americans have generated the highest spend on their credit cards year-on-year for more than 20 years, according to Mail Monitor, the credit card tracking service from market research company Synovate.

Anuj Shanhani, director of competitive tracking services for Synovate’s Financial Services Group, argues that despite legislative changes and the ‘Dr Dooms’ of the world, credit card issuers are getting back into the market.

The average spend across all cards is on a continual rise, reaching $1,627 for the second quarter this year. When American credit card spend is averaged over a quarterly basis, the only time consumers spent more was in the third quarter of 2008, the quarter prior to the economic crisis.

“We are being repeatedly reminded that anybody betting against the US consumer ends up on the losing side,” said Shanhani.

“American consumer spending accounts for approximately 70% of the US’s GDP, and a robust spend of over $1,600 suggests that the ‘Dr Dooms’ of the world may be underestimating this economy’s recovery.”

Synovate also predicts that Americans will also receive 2.25bn credit card offers by the end of the year, a 62% increase on 2009.

Research by Synovate shows that during the second quarter of the year, US households received 640.3m credit card offers, which is an 83% increase compared with the same period a year ago.

“This is just one piece of positive data. Synovate Mail Monitor also recorded the third consecutive quarterly increase in mailings since we hit a significant low in Q3 2009,” Shanhani added.

“Despite the uncertainty introduced by the CARD Act, Financial Regulation Bill, and other such legislative changes, we are seeing the credit card issuers get back to market, trying to entice consumers once again.”

Chase was found to be the lead issuer, quadrupling its mailings in the last year, and Citibank, the second largest mailer has tripled its mailings in the last quarter. Synovate also reports that Discover “demonstrated a major comeback” by showing an increase of 70% in mailings compared with the previous quarter.

“The increase in direct-mail marketing is due to our significant investments in new products and features,” said Paul Hartwick, director of communication and public affairs for Chase card services.

“It supports our overall strategy, and we believe it gives us a competitive advantage. We have made significant investments in building the Chase card business and our suite of products during this economic downtown and are already seeing benefits from that.”

In addition to increased mailings, issuers are incentivising customers to get them to sign up to their credit card. Introductory offers have increased to 71%, the highest since Syonvate Mail Monitor began tracking the data over 20 years ago.

“Issuers want to get you to use their card, that’s the whole purpose of getting new customers. They are willing to offer you a 0% intro rate for purchases, if that’s what it takes to become the top card in your wallet,” said Shanhani.

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