Give Credit Where Credit Is Due

A lot of people receive preapproved or prescreened credit card offers in the mail, and I am no exception.  I sometimes receive several in a week, and on more than one occasion I've received several in a single day.  Thus throughout the years I started to wonder how many of these applications are actually sent to me in a given year... and in 2012 I decided to find out.  Therefore, beginning on January 1st I began collecting and documenting each and every prescreened credit card offer that arrived in my mailbox not only to determine how many of these offers I received, but also to document the differences between the offers.

Since January, I have documented a total of 69 offers that have arrived in the mail.  Initially I thought about attempting to document offers received via email as well, but I soon realized that would include hundreds of such offers, so I opted to limit this experiment to only offers that happen to appear in my physical mailbox.  I then used a spreadsheet to list details such as introductory interest rate, regular interest rate, annual fee, balance transfer fee, as well as any particular "bonus" offered with the card such as airline miles, cashback bonuses, or points per dollar spent.

Yes... I apparently have far too much free time.

The Offers

Here is a summary of some of the more interesting facts about the prescreened offers I received:

• 57 of the 69 offers included a introductory APR of 0%.
• A shortest intro APR offered was for 12 months; the longest for 18 months.
• The lowest, regular (non-intro) APR was for 9.99%; the highest was for a whopping 25.24%!
• 61 of the 69 offers had no annual fee.  The few cards that did include an annual fee were typically travel cards that offered airline miles for every dollar spent.  The annual fee for these cards ranged from a low of $95 to a high of $150 although in most cases the fee was waived for the first year.

Now as far as which banks were responsible for the offers I received, the breakdown is as follows:

• Discover: 23
• Citi / Citbank: 16
• Capital One: 14
• American Express: 11
• HSBC: 2
• Comenity Bank: 2
• Chase: 1

It should be noted that in mid-2012 Capital One bought HSBC, so I could have listed those as the same company for a total of 16 offers.  Either way Discover is the clear winner here with a total of 23 offers out of the 69 I received.

If you prefer a visual reference, here is a pretty chart showing the final outcome taking into account conjoined companies:

Factors Impacting The Number of Offers

There are a few specific items I need to point out regarding the total count of prescreened offers showing up in my mailbox.  First of all I currently hold three credit cards.  I have a Wells Fargo Visa, a Chase Freedom Visa, and a Menards card issued by HSBC (aka: Capital One).  My relationship with these companies most likely impacts the number of offers coming from them, as I wouldn't expect to get a lot of offers from companies that I already hold cards with.

I have been told that Wells Fargo does not currently send prescreened offers to non-Wells Fargo customers therefore if someone isn't a Wells Fargo customer and doesn't receive offers from Wells Fargo I wouldn't exactly be shocked.  In the interest of full disclosure I should mention that I do in fact work for Wells Fargo, but I do not work in the Credit Card line of business so don't quote me on how they handle their prescreening process.

As to my Chase Visa card, I should note that prior to me having a Chase card, I would get prescreened offers from Chase about as often as I do from Discover.  Apparently these people don't give up easily.  Capital One on the other hand doesn't seem to care that I have a HSBC issued Menards Card, because they continue to send me prescreened offers on a regular basis.

In years past, I have had cards from Capital One, Citibank, Discover, and retail (store) cards issued by Wells Fargo and GE Financial.  The Wells Fargo card was from a furniture store, and the GE account was for a carpet purchase.  The cards from Discover and Capital One were closed upon my request because I rarely used them and they were simply taking up room in my wallet.  The store accounts were opened at the time of the purchases due to 0% APR offers, and they were closed within the interest free window in order to prevent any interest charges being applied to the accounts.  I only mention these cards because I have an account history with these companies which may or may not impact the number of prescreened offers I receive from them.

My Credit Profile

I will admit if you would have asked me how many prescreened credit card offers I receive in the mail over a one year period, I would have guessed at least 150.  When the total count showed me that I actually receive less than half that amount I was somewhat surprised, but I cannot state if my estimates were based upon past experience, or if perception simply doesn't match reality.

I don't believe my actual credit score has changed much in the past few years, so I doubt that has anything to do with the number of offers arriving in my mailbox.  I monitor my credit report on a regular basis and have good to excellent credit.  My credit score ranges from high 700s to low 800s depending upon the credit bureau and when I happen to check (the most recent score I have seen was in the upper 700s).  I've never been late on any payments and I have verified my credit reports do not show any late or missing payments.  

That said, I have noticed over the past year my credit score appears to have dropped a bit which I attribute to the fact that some of my older accounts are dropping off my credit history due to them being closed.  This likely impacts my credit utilization, and because I no longer have a car loan that I'm paying on a monthly basis I'm assuming there is some impact due to fewer types of credit being used.  

One mistake I made in years past is to close old credit cards and open new accounts when there was a tempting bonus offer.  For instance at one point I had a Capital One card with a fixed 5.9% APR, however because I rarely used the card I closed it and opened up a different account with another card issuer because of a $300 cash bonus.  Because I don't typically carry a balance on any of my credit cards, I generally don't care about the APR of a card, however the cycle of opening and closing credit card accounts can have a negative impact upon a credit score.  Because of this, I plan to keep the cards I have even if I only use them several times a year.  

The Never-ending Sales Pitch

It seems clear that Discover, Capital One / HSBC, and Citi are very determined to give me a credit card and on more than one occasion I received multiple offerings from these companies within a one week period.  In fact, I received an offer from Discover on April 16th, and a second offer from them two days later on April 18th.  The offers themselves were identical, so I could see no reason why they were so quick to send a follow-up mailing.

As mentioned previously, Discover was responsible for sending me a total of 23 prescreened offers throughout 2012 or an average of two offers per month.  I am convinced that they are single-handedly keeping the US Postal Service in business.

Speaking of Discover, their typical offer included a 0% intro-APR for 12-15 months with a regular APR of 9.99%.  However in May I noticed their regular APR moved upwards to 10.99% and in July it moved up to 12.99%.  In August the APR reached a peak of 14.99%, but two short weeks later in September they were back down to 9.99% where they have remained until the end of the year.  I'm not sure what drove the varying interest rates, but it seems odd that an APR would slowly rise only to drop 5% in a matter of two weeks.  I guess this is one case where it clearly pays to keep track of the various offers before sending in an application.

The Outliers

If this little experiment has taught me anything, it is that there are vast differences between offers when you look at the details.  Late in the year I received two offers issued by Comenity Bank for the "Express NEXT" card (a store credit card for the Express clothing stores).  This wasn't exactly shocking to me because I had recently signed up for a rewards program in my local Express store, and shortly thereafter the prescreened offers showed up.  The disturbing aspect of this was that the regular APR for this card is a whopping 24.99% which was second only to an offer received from Sears.

Speaking of Sears, their offer (issued by Citibank) not only was the highest APR of any card received throughout the entire year at 25.24%, but they didn't even include any type of intro APR.  They were nice enough to offer a $10 statement credit after the first purchase, but honestly... I find this offer insulting.  I realize store-branded cards typically hold higher APRs than regular bank-issued, non-branded cards, but a card with an APR above 25% is simply insane especially considering the card offers no significant benefits on top of a traditional card.

I realize Sears has been losing billions of dollars a year for the past few years (yes that is billions with a "B"), but if they want to stay in business and build brand loyalty it probably isn't a great idea to attempt to return to profitability on the backs of their credit card holders.  To make matters worse I hold a Sears loyalty card with VIP status meaning I have spent thousands of dollars with Sears in a one-year time frame... and this is the way that loyalty is rewarded?  I'm underwhelmed Sears... but that really isn't anything new.

The Fine Print

I of course am not about to list all of the fine print for each of the offers I received, but I will provide a little insight as to my methodology.

First, if the regular APR was listed as a range (for instance 9.99% - 12.99%) I always listed the lowest APR in that range to correspond to a person with good to excellent credit.  Obviously not everyone would qualify for the lowest APR, but this was one way to level the playing field.

Next, most APRs were listed as varying with the market based upon the Prime Rate.  I documented the APRs at the point the offer was received, but if the Prime Rate happens to change, it is assumed some of the APRs would as well.

Finally, I didn't list all of the bonuses that are included with each offer.  I did document them in my spreadsheet for comparison sake, but I didn't take the time to outline each here for space reasons.  Most of these offers were for point or mileage bonuses after charging so much on the card within a specific time period.  For example it is very common to receive 10,000 bonus miles or $100 statement credit if $1,000 is charged within three months.  A few offers included gasoline gift cards, cashback bonuses, or bonus miles upon an approved application as well.

Stop The Madness

As fun as this process is, I really have no desire to receive dozens upon dozens of these offers each and every year, and because of the ever-increasing threat of identity theft, I'm forced to shred these offers rather than just chucking them in the trash.  Therefore, I will be putting a stop to most of these offers by following the recommendations of the Federal Trade Commission.

The FTC advises anyone who wishes to stop such prescreened offers to call toll-free 1-888-5-OPT-OUT (1-888-567-8688) or visit www.optoutprescreen.com.  Either of those options should remove your name from the mailing list for five years, which for most people is probably a good thing although if you do decide you want a credit card you may have to reach out to a card issuer rather than waiting for them to reach out to you.  However as a bonus, you will probably save several trees due to the massive reduction in junk mail arriving in your mailbox.

Do you have a question or comment about this post?  Sound off in the comments and I'll do my best to respond.

An Open Letter To Sears

Dear Sears Executive Management Team, Board of Directors, and any other employees who actually care:

I have a major problem with Sears, but I also have hopes and dreams that Sears can once again become a store in which customers actually seek it out rather than simply ending up there as a last resort.  Sears has so much potential, but it seems leadership lacks the ability of tapping that potential and in fact it seems they stomp it to the ground as often as possible in order to prevent customers from thinking Sears might be a great place to spend money.

Sears is simply out of touch and yet it appears the management team doesn't even realize it. Watching this sad implosion is much like watching someone walk into a glass door and hit their head.  Rather than realizing the door is closed and they can't walk right through, they just keep pounding their head against the door again and again expecting a different result.

I'm sympathetic Sears... but my sympathy is short lived to people (or businesses) which don't learn from their mistakes.

One major issue with Sears is that you are trying to be all things to all people. You sell appliances, you sell electronics, you sell home furnishings, you sell baby items, you sell clothing for the entire family, you sell lawn and garden equipment, power machinery, tools, exercise equipment, vacuum cleaners, garage door openers, pool tables, grills, tires, car batteries, jewelry, shoes, kitchen gadgets, housewares, eyeglasses, photography sessions, and much, much more.

In my local store, you just added beds which required a sizable portion of the store to be removed in order to make way for a product which most likely will not do any better than the housewares it has supplanted.  How do I know this you ask?  Well for starters, within 1000 yards of my local Sears store you can find no less than FIVE other stores that sell mattresses.  I'm not talking about furniture stores here - I'm merely talking about stores that focus on beds and beds alone.
Don't believe me?  Here is a short list of the stores I'm referring to:

Beds and Beds
Klocker's Mattress World
Beds by Design
Select Comfort Sleep Systems
Comfort King Mattress Factory

One of these stores is in the same mall as Sears, and another one is about 100 yards away just across the parking lot.

In addition to the above, there are several furniture stores close by as well.  These include HOM Furniture as well as Slumberland Furniture.  There are also other big box retailers that offer beds including Sam's Club, Menards, Macys, JCPenny, and Big Lots.  The saddest part is that I'm listing these stores from memory which suggests there are probably a few others I'm not even aware of at the moment.

How about a little market research Sears? How about instead of trying to be all things to all people you define who your target customer is and what market you are trying to enter?  How about you define who your competition really is?  Are you trying to complete with Best Buy and Home Depot, or are you trying to compete with Montgomery Ward and Woolworths?  Sadly... it appears you are trying to compete with them all and you failed to get the memo that a few of them no longer exist.

Find something you do well, and stick with it. Even Walmart doesn't sell everything (you will notice they don't have a stellar tool selection, and they tend to shy away from most major appliances aside from the occasional dorm sized fridge or chest freezer). The fact is, Sears still has a reputation built around brands like Craftsman and Kenmore, so why is it so hard to focus on what people actually want?

Most people don't go to Sears to buy clothing... they go to Sears to buy something else and just happened to find a pair of jeans on the way out.  People also aren't looking for fine jewelry or perfume at Sears, nor do they want to buy a mattress from a store that stocks string trimmers two aisles away nor do they want to be assisted from a guy who was selling shoes ten minutes ago, and who will probably be talking to someone about a cordless drill an hour later. 

The average Sears store is a relic, and sadly is probably twice the size it would need to be.  Many are located in malls which are underperforming, and those that are truly standalone stores just aren't destinations any longer.  What Sears should do is focus upon appliances (both large and small if you must), lawn and garden, and tools.  Drop "the softer side of Sears" because it isn't working.  Kick the mattresses and the shoes to the curb, remove the glass cases full of gold plated Timex watches, and let someone else take the cheesy family photos and sell bargain eyeglasses to the kids.

It is time to understand that Sears hasn't been relevant for 20 years.  It is time to acknowledge your idea of what is trendy or what is hip really isn't.  Nobody wants to spend a premium for something that has Ty Pennington's name on it nor do people want the Kardashian name printed on the front of their shirt.  The average person who shops at Sears is not a designer nor a fan of People magazine... they don't care about the people you seem to think they care about.  For every piece of Kardashian clothing you sell, someone else is shaking their heads as they turn around and head towards Macys or Kohls. 

It is probably also worth noting that nobody under the age of 40 even knows who Jaclyn Smith is, so while your competition is snapping up celebrity names like Martha Stewart, Sean Comes, and Gwen Stefani, you are still trying to convince the world that trendy clothing should somehow be synonymous with a former 70s television star.  If that isn't a prime example of how Sears is no longer relevant I'm not sure what is.

Finally, when you start acknowledging that you can't be the best at everything and that you can't be all things to all people, perhaps you will also acknowledge that when someone else offers a better product, it is probably a good idea to sell it rather than try to make it.  Sorry, but slapping the Craftsman or Kenmore name on an otherwise inferior product is no way to build brand loyalty.  In fact it has the opposite effect.

This is why so many other premium brands restrict where the brand can be used. Audi doesn't put their logo on a Volkswagen.  Banana Republic doesn't stock Old Navy sweatshirts in their stores.  DeWalt has distanced themselves from Black & Decker.  Ralph Lauren sells his lower priced items under the Chaps brand.

Kenmore and Craftsman should be premium brands.  They should not be diluted to the point where they can be tossed on grill accessories or cheap garage cabinetry made out of MDF, or cheap imported tools.  Extending the brand does not necessarily improve the brand, and until you realize that you will continue to lose millions of dollars each and every quarter.  Or, as is the case with your most recent quarter... you will lose HUNDREDS of millions of dollars.  I won't claim to be an economist or long-term business strategist, but I somehow don't feel that business model is sustainable.

Oh and by the way... the 1980s called and asked if they could have their Sears logo back. This is the modern world, and it requires a modern look.  Hire a new marketing firm and step one should be a logo redesign.  Retro styling would serve it well, and a shift to "Sears and Roebuck" and or a shift straight to the "Roebuck" name with a premium twist might serve you well.  Sadly, taking your company backwards 100 years would actually result in modernizing the entire concept.  However please don't insult your customers by slapping up a new sign and pretending everything has changed.  You need to start from the ground up.  Modernize the stores, improve the customer experience, remove the high pressure sale tactics that make customers feel like they are walking the Midway at a carnival, focus on what you can do well, and maybe you will see your beloved customers return.

Sincerely,
Craig