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Research: Credit card mail offers with annual fees return

Once nearly extinct for those with good credit, they're rebounding

By Seamus McAfee

While fewer Americans are receiving offers for credit cards in 2009, more of the offers come with an annual fee, according to data collected by research firm Synovate.

Mail Monitor, the mail tracking service for Synovate, said during the first quarter of 2009, Americans received 372.4 million card offers, a 67 percent drop from the 1.132 billion offers that streamed into U.S. homes in the same period of 2008. More than one fourth -- 27 percent -- of the 2009 offers carried a fee, compared to 18 percent of the offers during the first quarter of 2008.

Andrew Davidson, Vice President of Competitive Tracking Services for Synovate's Financial Services Group, attributed the rise in fee-based offers as issuers' possible way of offsetting the overall decreased amount of offers made during the economy. "As issuers continue to cut back offers and the mailbox becomes more superprime we are seeing a proportionately higher number of card offers with an annual fee," said Davidson.

As issuers continue to cut back offers and the mailbox becomes more superprime we are seeing a proportionately higher number of card offers with an annual fee.

-- Andrew Davidson    
Synovate vice president    

Davidson said the mailbox is still the most popular way for issuers to reach potential customers, despite recent response rates as low as 0.6 percent. "Direct mail is still the No. 1 method for acquiring new credit card customers," he said in a prepared statement.

The increase could also be traced to issuers' increasing reliance on co-branded airline rewards cards, which typically carry an annual fee, and a move toward a fee-based model in anticipation of the now-approved, Credit CARD Act of 2009 Davidson said.

The bill, signed by Barack President Obama on May 22 with overwhelming support from the House and Senate, will aim to establish fairer practices by credit agencies, including protections against arbitrary interest rate increases. The bill did not include any direct comment on annual fee setting.

Credit card fee history
Annual fees first emerged under the term "membership fees" from charge cards such as American Express and Diner's Club, and were used by companies to profit because with charge cards, cardholders' pay balances in full every month and hence carried no interest. When annual fees were later imposed on bank cards as well, issuers said they lowered interest rates and protected against fraud and bankruptcy claims. Only in 1990 when AT&T issued a no annual fee credit card did annual fees among credit cards start to decline. Today, most credit cards are annual-fee-free to high-credit customers, with fee-based offers reserved for riskier, lower scoring consumers.

However, bankers and some industry analysts have warned that the new legislation could spur issuers to hike interest rates, lower reward point value, increase annual fees to participate in rewards programs, or even signal an across-the-board return to credit cards with annual fees. "There is a great deal of speculation as to what the credit card industry will look like once the Credit Cardholders' Bill of Rights come into effect," said Davidson, "but, while the majority of offers continue to carry no fee, we may already be moving in the direction of a fee-based model."

See related: Credit card reform and you, The history of credit cards, Credit CARD Act of 2009 signed into law, Will new law hurt or help consumers?

Published: May 26, 2009

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Credit Card Rate Report

Updated: 03-31-2015

National Average 14.90%
Low Interest 11.62%
Business 12.85%
Student 13.14%
Balance Transfer 14.04%
Reward 15.04%
Airline 15.10%
Cash Back 15.28%
Instant Approval 17.93%
Bad Credit 22.48%