Credit cards are back with open arms

Stacey Vanek Smith May 21, 2010
Credit cards Peter Macdiarmid/Getty Images

Credit cards are back with open arms

Stacey Vanek Smith May 21, 2010
Credit cards Peter Macdiarmid/Getty Images


Tess Vigeland: The Senate passed its version of the financial reform bill this week. Now, they’ll try to reconcile it with the House version. Both give more power to regulators, and they establish a consumer financial protection agency. But will they be able to protect us from ourselves? There was a lot of talk over the last year and half about how we’d be forced off our credit addiction, because banks wouldn’t be giving it out so freely. But have you checked the mailbox lately? Credit card solicitations are way up.

Marketplace’s Stacey Vanek Smith reports.

Stacey Vanek Smith: Americans and credit cards made beautiful music together. Credit card companies loved us for the over-stretched consumers we were. We loved how they gave and gave and gave…

Joe Cocker, singing: You are so beautiful…

By 2008, Americans owed more than $900 billion on their credit cards. Then, the economy collapsed, and we couldn’t pay our bills. Card companies lost $150 billion. They stopped writing, they stopped calling. Plastic was breaking up with us.

Michael Bolton, singing: How am I supposed to live without you?

We went from getting eight billion card offers a year to just a billion. Andrew Davidson studies cards for Mintel Comperemedia. He says card offers dried up for all but the credit superstars.

Andrew Davidson: What we saw was the profile of the entire mailbox shifted to what the industry terms as “prime” or “super-prime” customers, so those with very good credit histories.

That’s changing. Card companies, like Chase and HSBC, are jamming our mailboxes with offers, and people with simply good credit are getting wooed again, too. Solicitations are up more than 80 percent this year. Credit cards want us back.

Air Supply, singing: I’m all out of love, I’m so lost without you.

What changed? The economy’s improving and defaults are down. But card companies need us like never before. Credit card reform is expected to cost card companies as much as $50 billion a year in lost interest and fees. And then there’s us. We’re just not that into credit anymore.

David Robertson publishes of the Nilson Report, an industry trade journal.

David Robertson: We have changed the way we look at credit, and even those people who are credit-worthy, and employed and quite capable of paying their bills, have stopped really making discretionary payments with a credit card.

Enter a new round of rewards and incentives to win us back. Ron Shevlin analyses banking products for the Aite Group.

Ron Shevlin: They’re bolstering cash back, how much they will pay back on grocery or gas purchases, making it easier to redeem, doing merchant-funded rewards programs.

Peaches and Herb, singing: Reunited and it feels so good…

Not so fast. This isn’t the naive romance of a few years ago — and it’s not unconditional love anymore. Bill Hardekopf is CEO of

Bill Hardekopf: Issuers are relaxing a little bit more in the sense that they’re soliciting more people, but I think they’re being careful as to not taking on too much risk.

They’re also charging higher interest rates and tacking on more fees. Oh relationships — why are they always so complicated?

In Los Angeles, I’m Stacey Vanek Smith for Marketplace Money.

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