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The late Arizona Cardinals football coach Dennis Green was known for a post-game tirade on the Chicago Bears, in which he remarked, “They are who we thought they were!”
Well, Green obviously wasn’t talking about your mail. But take a closer look at the credit card offers jamming your snail mail box and you’ll discover that you likely are who the servicers thought you were. That’s because they base their credit card offers to you on a very specific profile of your financial condition, one that is data mined from all sorts of public information.
The Wall Street Journal recently reported that the growth of personal data mining has made targeting consumers with a pitch-perfect credit card offer more refined than ever.
If you’re receiving offers that tout the rewards points that will pile up when you take time away to visit exotic resorts, it generally means that you are considered to be someone who has a lot of disposable income and manages credit wisely.
Conversely, if you’re getting a lot of “no interest for six months” offers and rock-bottom credit limits, it means you’re considered a risky investment for the card company.
How do they determine who you are and what you’re about? There’s a certain profile of consumer that they’re looking for, and if you tic off those boxes, you’ll likely get a great offer.
A study by the Association for Consumer Research, an organization of behavior scholars and researchers in academia, industry and government, found that demographics play an important role in determining who gets what kind of credit.
Those who are considered better educated (college graduates or some post-secondary education), married and are over age 34 are the prime targets for credit card offers and can expect to be targeted with the most enticing pitches. Generally, that age group taps the right buttons in the all-important areas of length of employment, length of residence and income, all considered key factors in determining stability. A stable person is someone who is more likely to pay their bills, since they’ve established the ability to complete tasks and survive at some level.
There’s one more key factor. The ACR study also concluded that those who use bank cards the most are those with middle to upper-middle incomes, which generally are those who are married, been employed, and lived in the same place. Thus, they will likely receive the best offers, as they are more likely to generate the interest and fees that drive the financial engine.
Those outside of the prime bubble will receive offers, but that marketing will likely be less wonderful and carry significant penalties for non-compliance in your payment terms.
THE GOOD NEWS
The good news from the targeted marketing approach is that you’ll receive offers that you might actually be able to use. After all, if making the monthly nut is a big issue since you’re unemployed and have no permanent address, you’re not likely to be all that concerned with piling up rewards miles from your trip to Tahiti. But on the downside, it also allows the card companies to tempt you into high-risk/low reward situations, including cards that carry high fees and automatically raised interest rates for the slightest late payment.
The Wall Street Journal reported that an MIT study of more than one million credit card mailers discovered that one of the key factors determining which card offer you receive is your education attainment. Those who have graduated college are solicited for credit cards that carry higher upfront fees and often higher annual percentages, but also offer lower penalty fees and such coveted incentives as airline miles.
In contrast, those who are deemed to be less financially savvy, as determined by their lack of education, will get a lot of tiny print dangers, heavy penalties for late payments, hidden bumps after low introduction periods, and visual distractions on the mailers. In other words, luring the rubes into the circus tent is the prime directive.
THE SCHUMER BOX
Of course, you may not be able to determine at first glance whether you’re getting the right kind of offers. But there is a key mandated by law in all offers that levels the playing field – it’s called the Schumer box, named after New York Senator Charles Schumer, who championed the law.
The Schumer box requires that all relevant terms of the offer be placed in one location and in text. This allows you to carefully scrutinize the offer and make sure that you are, in fact, getting a fair deal. You almost can ignore the rest of the materials, as the Schumer box contains all the specific terms that will govern your credit agreement. Anything else is just window dressing.
Moving up in the credit rankings is usually a matter of time for most people (note – pro athletes, Internet entrepreneurs and rock stars can skip this part). Once you take out a loan or obtain a credit card, make timely payments on time or in full each month. Keep your utilization of your total credit below 30 percent (in other words, don’t run it up to the top of the balance). With each passing day you meet that criteria, your credit ranking should improve.
Even though we are in an age where mobile and Internet communications rule, banks will continue sending direct mail with enticing offers. It’s actually a way to cut through the clutter, since most people no longer receive much snail mail.
Keep in mind that even cards where you are “pre-selected” or “pre-approved” will still require a credit check when you apply, and you may still be rejected. And keep in mind that if you get an offer through the snail mail, it still is worthwhile to take a look online and see if there is a better offer out there. Self-selecting which club you join may be a smarter move than the invitation to sign up via the snail-mail solicitation.
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