Credit Cards: Card Issuers Turn to Stealing Customers
Credit-card issuers, faced with a saturated market for new card holders, are resorting to stealing customers from one another, turning an already competitive industry into a fight to survive.</br></br>After the early success of American Telephone & Telegraph Co.'s recent "balance-transfer" promotion, a growing number of issuers are offering similiar programs; under them, existing and prospective card holders are offered lower interest rates or other incentives to transfer balances outstanding on other credit cards. The promotion is offered only to those who keep a balance outstanding on their credit cards. In effect, card issuers are trying to steal market share from competitors by enticing customers to transfer their card debt.</br></br>In all, the number of issuers that are now promoting a balance-transfer program has nearly tripled to 220 from 84 a year ago, according to RAM Research Corp., Frederick, Md., which tracks rates and fees of 536 credit-card issuers. There were only a few issuers with such a program two years ago.</br></br>The growth of such programs is good news for consumers, who can expect to see interest rates fall even more. But it could spell trouble for the credit-card industry, which is likely to see profit margins shrink and some issuers forced out of the business.</br></br>"What it spells is lower profits for issuers," says Spencer Nilson, publisher of the Nilson Report, an industry newsletter in Santa Monica, Calif. "It also spells more consolidations, with stronger issuers buying up weaker ones."