Forget about those zero-percent teaser rates, those low-interest offers for balance transfers, the cash-advance convenience checks.
Now arriving in your mailbox is a host of new credit card come-ons, offering one-of-a-kind experiences and/or special rewards and savings -- all to get you to sign up for one more piece of plastic.
Are you a NASCAR fan? Then consider the NASCAR RacePoints Visa card. Use it often enough and you could earn enough reward points -- 125,000 -- to become "Crew Chief for a Day" and find out what it's like to be part of a race team.
If you're a young, hip Manhattanite who likes to stop in at the trendiest nightclubs, then the IN:NYC card may be for you. Zip it out and you can jump to the front of the line at such hot spots as Crobar and Lotus.
Or, if you like to save money, use the GMAC Mortgage Equity Rewards card. For every $2,500 you charge on the card, you can trim your GMAC mortgage by $25.
Credit card reward programs have come a long way from the revolutionary but simple programs first offered in 1986. Then, Discover offered a simple cash rebate based on the amount you charged, and Continental Airlines became the first carrier to extend frequent-flier miles to credit card users. Since then, every airline has joined in, while credit card issuers have devised all sorts of cash-back and reward incentive programs. Now, the goal is to make those rewards more "experiential," so unforgettable and unusual that consumers will clamor to put one more card into their already loaded wallets.
"The general trend is to try to develop more rewards propositions that are simply more relevant to people," said Michelle Shepherd, group executive of credit card giant MBNA Corp. That means more customized programs that can be closely linked "to whatever stage in life a person is in, whether it's someone who's trying to reduce a mortgage or someone dreaming of going to the Super Bowl," said Shepherd, whose company issues the NASCAR and GMAC cards.
All of this is happening against a backdrop of industry consolidation, as major credit card issuers are merging. On June 30, Bank of America Corp. announced it would acquire MBNA for $35 billion in stock and cash to create the nation's largest credit card company.
The deal, expected to be completed at the end of the year, follows Bank of America's purchase of FleetBoston Financial Corp. last year, as well as J.P. Morgan Chase & Co.'s acquisition of Bank One Corp. That merger made Chase the nation's largest credit card firm, at least until the Bank of America-MBNA merger is finalized.
When that happens, the nation's top five credit card firms will account for 72 percent of the credit card market -- a concentration level that consumer advocates fear will drive up interest rates and fees, which they consider too high already.
Yet industry officials and consumers don't expect the merger to lead to fewer solicitations. They predict MBNA customers in particular can expect even more appeals in their mailbox as Bank of America seeks to sell them its wide array of banking services.
Bank of America could well follow the lead of one of its rivals, Citigroup Inc., which in April began offering its banking customers extra reward points every month for garden-variety banking services. The more accounts a customer has, such as checking, mortgage or home equity loan, the more points he or she can earn, with as many as 1,200 points a month to the Premium CitiGold cardholder with seven or more Citi accounts.
Last year, just over half of the 7.5 billion new-card solicitations sent out involved some sort of rewards offer, up from 44 percent in 2003, according to Comperemedia, a mail-tracking service.
Rising interest rates explain part of the reason for the switch to reward solicitations. As the Federal Reserve Board boosts interest rates from all-time lows, it costs banks more to lend money, making zero- and low-interest teaser rates less attractive business offerings.
But the shift also underscores another reality of the credit card business: "The U.S. is virtually saturated with credit cards," said David Robertson, publisher of the Nilson Report, a newsletter that monitors the credit card industry. The average American household has 11 credit cards, including the general-purpose cards (Visa, MasterCard, American Express and Discover) as well as the private-label type, such as Exxon, Sears and Home Depot, Robertson said.
"That means anybody who's creditworthy and wants to have a card" has not just one but many, Robertson said. And that, he said, also means that reward programs "are not a gimmick but a reality" because each credit card issuer has to figure out what will motivate someone to use its card almost exclusively.
For issuers, that means devising the most compelling reward program that fits a consumer's particular interest and delivering those rewards sooner rather than later, Robertson added.
At Chase, that means offering cards for every stage in a consumer's life:
* The college student can use Amazon.com Platinum Visa, which gives triple points for every dollar spent at Amazon as well as a $25 Amazon gift certificate for every 2,500 points.
* The young professional can turn to Starbucks Card Duetto, which every month automatically credits a cardholder's account with 1 percent of his or her card purchases. The credits can be redeemed for Starbucks coffee. "Depending on how much you spend a month, you may never have to pay for a latte again," said Chase spokesman David Chamberlin.
* The parent with young children can use the Toys R Us Visa, which gives a 4 percent rebate on all purchases made at the national retail chain.
* Seniors can turn to the AARP Rewards Platinum Visa, which offers discounts at many stores and businesses and also issues $25 cash rebates for every 2,500 points earned.
What do all these reward programs mean for consumers? For one thing, they mean consumers should be able to find the best deal for them, Robertson said. "If your issuer is not offering a rewards program [that works for you], then knock on the door and ask them why," he added.
However, consumer advocates warn would-be cardholders to be careful before they sign on to any reward program. There are lots of limitations, such as caps on how many reward points can be earned in a three- or 12-month period. And often these restrictions are not disclosed until the consumer signs up for the program. Similarly, it is hard to find the number of reward points needed to redeem many of the highly touted prizes before signing up and getting a credit card number to access the online site. That makes it hard to figure out the value of many promotions, especially when there may be extra charges, such as shipping and handling for merchandise or transaction fees for airline tickets.
"I think the rewards program is one of the biggest smoke-and-mirrors for consumers," said Robert D. Manning, a Rochester Institute of Technology professor and author of "Credit Card Nation," which takes a critical look at the credit card industry. "There are so many games to earn points and get rewards, consumers don't understand the value. Simplicity is the best deal, and getting cash back is the very best," Manning said.
Many times, it costs more to earn a product, whether it's an airline ticket or a DVD player, than to buy it directly. Consider the MP3 player that American Express Rewards offers as a reward for 26,000 points, Manning said. In effect, the music player costs the consumer more than $300, Manning said -- at least $40 for the annual fee for the card, plus the $260 the consumer could have obtained from another reward program that offered 1 percent cash back on purchases. Yet, the consumer could have purchased that exact product online for about $119, Manning said.
Beth Lacey, American Express senior vice president and general manager of strategic alliances, said the activity level of the company's reward cards suggests they are a good deal. "Of course we will continue to innovate to accommodate the needs of our customers," she added.
And, of course, there's more than rewards to consider when selecting a card. If you don't pay off your credit card every month or are often late with a payment or owe more than your credit limit, you need to also weigh a card's interest rate and fees, for as anyone who has had a credit card knows by now, fees have been steadily climbing. Most issuers charge $39 if a payment is late, up from an average $32.61 a year ago and $27.10 in 2000, according to Cardweb.com, a Web site that tracks the credit card industry.
Meanwhile, over-the-limit fees are now more than $30, up from an average $26 in 2000. And many issuers are now imposing this fee when a customer's balance goes over the limit at any time during the month; it used to be charged only if the closing balance for the month were over the maximum.
Greg McBride, senior financial analyst for Bankrate Inc., whose Web site Bankrate.com aggregates financial rate information, said credit card issuers are turning to reward programs because four of 10 Americans pay off their card balances every month. Not only do these customers not care about interest rate promotions, but the banks also need to find another way to earn money from these customers because they don't pay interest.
Reward card customers, McBride said, tend to be more loyal -- and even more important, they use their cards more than regular cardholders. That, in turn, gives issuers an additional source of revenue from merchants who have to pay a processing fee for each transaction. These fees, which are about 2 percent of each transaction, vary among credit card issuers as well as among merchants. But increasingly, banks are charging merchants more money to process transactions rung up on the highest premium reward cards -- a sore point among many retailers who say they have to either eat those costs themselves or pass them on to consumers.
Credit card issuers, however, say that because these premium reward cardholders tend to spend more in the first place, the retailers end up earning more than they have to pay in higher fees.
MBNA says its reward cardholders charge twice as much as its regular cardholders, while American Express says its reward customers charge more than four times as much.
As American Express spokeswoman Desiree Fish said, "We make our money by encouraging consumers to spend with us, be loyal to us -- and we do that by rewards promotions."