Blog sponsored by Bankrupt-Law.com


By Andrea Coombes, MarketWatch
Last Update: 7:49 PM ET Apr 27, 2006

SAN FRANCISCO (MarketWatch) -- If your mailbox is overflowing with
preapproved credit-card offers, you're not alone. Card issuers mailed more
than 6 billion offers in 2005, a record number and a 16% jump from the 5.2
billion sent in 2004, according to a new report by Synovate, a market
research firm.

While consumers can opt out of preapproved credit offers, Synovate's
findings suggest that not many consumers are taking advantage of that
option.

"It's not that we're seeing more offers going to fewer households. It's that
we're seeing more offers going to more households," said Brent Stratford,
vice president of competitive tracking services at Synovate, in a telephone
interview.

"The average number of offers per month per household in 2005 was just over
six. That's higher than we've seen in the past. But the household
penetration is also higher. Those two things put together give you the
overall higher mail volume," Stratford said.

The company analyzes credit-card offers received by 1,200 households
nationwide every month, through the company's Mail Monitor tracking service.

American Express drove a big part of the rise in mailings, increasing its
direct-mail volume by 56% in 2005, while regional credit-card issuer
Columbus Bank and Trust increased its volume by 205%, according to the
report.

The average response rate for the industry was 0.3% in 2005, down from 2.2%
in 1993, when the industry mailed about 1.5 billion offers to consumers,
according to Synovate.

Opt out to reduce mailings

There is a way to reduce the mailbox clutter: Thanks to the Fair Credit
Reporting Act, consumers can opt out of prescreened credit offers by calling
1-888-5-OPTOUT or by visiting www.optoutprescreen.com. See this Federal
Trade Commission page for more information.

Opting out won't eliminate all preapproved credit offers, but it can reduce
the number significantly. Whether you opt out or not, consider shredding any
preapproved offers before tossing them to prevent identity thieves from
applying for credit in your name.

The interest-rate connection

Consumers may think the volume of mailed offers grows exponentially every
year, but credit-card issuers adjust their mailing volume based on a variety
of factors, Stratford said.

For instance, consumers' mailboxes saw some relief in 2002 and 2003, when
the number of mailed credit-card pitches declined to 4.9 billion and 4.3
billion, respectively, from 5 billion in 2001.
Stratford said the decrease was likely due to a jump in bankruptcy filings
in 2001.

"Some of the issuers were criticized for having too much risk in their
portfolio. I'm inclined to believe that the main reason for the drop-off in
2002 is that they were seriously looking at how they were addressing risk,"
he said.

The rising prime rate is the likely driver behind the current increase in
mailings, he said.

The fluctuations of the prime rate -- the interest rate on which credit-card
issuers base the rates they charge -- tend to impel card issuers to adjust
the volume of preapproved offers mailed to consumers, Stratford said.

"The primary reason for the increase in the mailings is the amount of change
in the prime rate," he said. "As the prime rate changes either up or down,
mailings tend to increase as issuers manage their portfolios."

Right now, "the prime rate is going up, so people who apply for credit on
price are going to be looking for more fixed rates."

For a card issuer with an increasing number of fixed-rate customers, "you
might want to modify your portfolio to include more cards at a variable
rate, so you're following the trend as it goes up," Stratford said