As economy improves, credit offers surge

January 14, 2012|Todd Wallack, Globe Staff

Financial companies are again stuffing mailboxes with credit card applications at a pace not seen since the last recession began four years ago, a sign that banks are relaxing their lending.

Promising everything from cash back to airline miles to zero percent interest for nearly two years, credit card companies mailed out an estimated 4 billion offers nationwide last year, nearly triple the amount delivered in 2009 and the most since 2007, according to Synovate, a unit of French market research firm Ipsos. That’s equivalent to a dozen applications for every man, woman, and child in the United States.

The surge in credit card mailings is another indicator of improving economic conditions and household finances in the United States, which in turn is creating a friendlier environment for borrowers. US banks eased standards for issuing credit cards throughout 2011, according a Federal Reserve survey of loan officers.

That means consumers turned down for credit cards just over a year ago might get them today. TransUnion, a credit rating bureau, said that 54 percent of credit cards were issued to consumers with less than perfect credit in the third quarter of last year, up from 50 percent the previous year.

“It shows a willingness of banks to lend again,’’ said Roy Persson of Synovate.

But the rise in offers is also causing concerns among consumer advocates, who worry that mailboxes stuffed with applications could tempt some people to sign up for too many credit cards and run up high balances.

“I am concerned that people will take on inappropriate amounts of credit or be allowed to do so,’’ said Linda Sherry, director of Consumer Action, an advocacy group in San Francisco. But, she added, “Card companies are under great pressure not to hand out cards to people who can’t pay them back.’’

Credit card offers nearly dried up after the recession, as the financial crisis and housing bust slammed banks, prompting them to frantically look for ways to cut back on risky loans. American Express even offered some card holders $300 to pay off their balances and close their accounts.

But credit card companies have stepped up their marketing efforts again as the economy has started gaining steam, the unemployment rate has declined, and credit card delinquency rates have plunged to the lowest levels in more than a decade.

Chase, for instance, is offering 50,000 bonus points - good toward roughly $625 worth of travel rewards - for signing up for its “Sapphire Preferred Card.’’ Capital One offers 1.5 percent cash back on purchases plus a one-time $100 bonus for its “Cash Credit Card.’’ Citibank is marketing a “Platinum Select MasterCard’’ with zero percent interest for 21 months.