How Do Credit Card Companies Decide Who to Send Junk Mail?

September 26, 2016

When it comes to sending credit card promotions in the mail, credit scores are only one data point among many used by card issuers to target mailboxes for their avalanche of offers.

A September 2015 report, “Information, Contract Design, and Unsecured Credit Supply: Evidence from Credit Card Mailings,” by researchers at the Federal Reserve Board in Washington, D.C., takes a deep dive into more than 200,000 credit card mail solicitations, collected from 2007 through 2014, to find out which factors may determine who gets what credit cards offers.

Score: Not surprisingly, the report concludes that consumers with the best credit scores are more likely to receive offers, and the offers they receive tend to be cards meant for consumers with higher credit: rewards cards with lower interest rates and higher credit card limits. Subprime consumers are more likely to receive offers for credit building cards.

Researchers found that among the solicitations they analyzed a 100-point increase in credit score correlates with a 4 percent increase in the likelihood of getting a credit card offer. In their study, a credit score increase of 100 points also meant a $240 hike in the minimum credit limit you were offered, and an interest-rate reduction.

Reboot: While the terms may be less generous, 40 percent of those who have declared personal bankruptcy still received at least one credit card offer each month, with those who’ve filed most recently 12 percent more likely to get an offer than those whose bankruptcy was discharged five years ago. That’s because bankruptcy filers have to wait eight years before they can use bankruptcy to have their debt discharged again, so borrowers are viewed as a greater default risk as they approach re-eligibility.

Also Factored: Targeting goes well beyond just credit scores. The report found that homeownership, college education, and higher household income all increase the likelihood that the household will be offered a line of credit.

Regional Considerations: The health of the local economy is also a factor. In the Federal Reserve’s research, for every one percentage point increase in a state’s unemployment rate, there’s a 1.6 percentage point reduction in the likelihood of a consumer receiving an offer.

The report found that the likelihood of any consumer receiving a credit offer in the mail fell from 60 percent in 2008 to 35 percent in 2010 following the financial crisis. That rate has steadily climbed back up to a current rate of about 50 percent, with a greater share of today’s offers going to those with the best credit scores.

While the findings of this report are enlightening, the study does not analyze how direct mail offers compare with online and mobile offers, which are quickly becoming important channels for consumers accessing credit offers. Two-thirds of consumer credit card applications are now digital,according to the Consumer Financial Protection Bureau.

Even with the rise of online credit card applications, some 3.6 billion direct mail solicitations went out to consumers in 2014, or about three per U.S. household, according to the CFPB.