Credit card lenders have increased their marketing efforts to attract new borrowers, showing confidence in US consumers even as the economy may be headed for recession.
According to a Financial Times, the volume of paper and digital mail requests rose for the second straight quarter after rising 47% in the first quarter report Sunday (July 31).
It could set a new high this year as there has been an 85% surge from 2020 levels. Issuers around the world have said they are allocating more to marketing spend, according to the report.
JP Morgan Chase, the largest U.S. card issuer, showed how fierce competition for borrowers has been lately, blaming higher customer acquisition costs for a 45% decline in card profits in the second quarter.
Meanwhile, Capital One, the second-largest U.S. issuer, announced that its quarterly marketing spend increased 62% from the year-ago period. The bank said it will continue to be aggressive.
This increase in activity is “notable” given the state of the economy, according to the report, with lenders typically sending out fewer card offers when things are looking uncertain. Usually the sale of premium cards and offers to existing customers are also in the foreground.
But now lenders believe they have room to expand the size of their loan books, with low unemployment and seemingly healthy consumer balance sheets.
Meanwhile, the Federal Reserve continues to raise interest rates to bring down inflation. The economy has been in transition for some time, with various factors – including the ongoing impact of the pandemic and the Russia-Ukraine war – making things much worse for many people.
See also: GDP is shrinking again, triggering renewed recession fears
PYMNTS recently wrote that the US economy contracted for the second straight quarter, which is a typical sign of a recession. However, economists have been divided on what to take as a concrete sign of such a slump, as the pandemic has altered a number of factors.
according to a report According to the Bureau of Economic Analysis, inflation hit a new four-decade high in the second quarter and consumer spending eased slightly.