Banks woo credit card clients at yearend
Avia Collinder, Business Reporter
Clovis Metcalfe, managing director, FirstCaribbean International Bank Jamaica Limited. - File
In a bid to boost credit card usage and also leverage business from holiday traffic, local banks spent big bucks in December to push their products through advertisements and store promotions.
Bank of Jamaica (BOJ) data indicates that credit card receivables declined slightly in the last quarter of the year with receivables of $17.3 billion in August 2009 declining marginally to $17.2 billion in October 2009, the most current figures available.
The data also shows that, historically, December, the high-spending season, has not been a period of significant credit card usage, except for 2007 when balances moved from $12.9 billion in September to $14.1 billion in December.
In 2008, balances in September were $16.3 billion, declining to $16.1 billion in December.
In 2006, the increase was marginal, with balances of $10.7 billion in September, increasing to $11.1 billion in December.
Still, the BOJ data does not reflect actual consumption of credit, just the unpaid or outstanding portions of credit consumed. But it is an indicator of trends in the credit card market and used as a proxy for its performance and growth.
At FirstCaribbean Jamaica, Managing Director Clovis Metcalfe suggests the declining receivables reflects the outreach by bankers who have been working with their borrowers to service outstanding debts.
"Customers firmly understand the importance of building a credit history. By charging and paying off their credit card bills they can build a solid credit rating," said Metcalfe. "This is the change that we have been seeing. Persons are paying on time and, in some cases, spending only what they can afford to pay off each month."
But the banks also acknowledge that some clients have been giving up subscriptions. Metcalfe said cancellations were below one per cent at FirstCaribbean, but that this was more than offset with a 13 per cent growth in new business. National Commercial Bank NCB) of Jamaica said its cancellations were below five per cent, but that it subscriptions were up 10 per cent.
Still, they all launched big promotions over Christmas, perhaps to reverse the trend of low card usage over the shopping season - investing in significant advertising in the Christmas shopping season, and in some cases, making direct pitches at consumers.
Barrington Graham, credit card manager at Bank of Nova Scotia Jamaica Limited (BNS), which is estimated to have some 100,000 credit card clients, said on Wednesday that the bank intensified efforts throughout 2009 to attract more customers although the downturn in the economy made this challenging.
During Christmas, the bank sought to take advantage of the traffic, said Graham, by ramping up marketing efforts 'on multiple fronts' to hold market share, and to attract new customers to Scotiabank's suite of reward cards, among them Magna, AAdvantage and PriceSmart Diamond.
"There is a natural increase in consumer spending so it makes sense to encourage the use of credit cards over cash," he said.
"For Scotiabank, the period also marks the first quarter in our fiscal year and we usually start the year off with some enticing promotions."
Promotional activities were were also up at NCB where efforts to entice new clients have been partially fuelled by the need to stem the potential loss of business for its proprietary KeyCard product and recovery from the blow delivered by PriceSmart which has now decided to reject the card.
PriceSmart said in early December that it would no longer be permitting use of the locally branded NCB KeyCard as of January 2, 2010.
In the week before Christmas, NCB's card centre employees were at MegaMart, a rival membership store, showering prizes on customers who paid their bills with KeyCard.
The bank has also been pushing its suite of international cards which Jamaicans will be able to use at the shopping centre.
Meantime, the store-branded PriceSmart Diamond MasterCard issued by Scotia-bank "has generated considerable interest among our customers and is now the most attractive credit card on the market with a three per cent cash back on purchases done in PriceSmart and a one per cent cash back on purchases done otherwise with the card," said Graham.
Scotiabank would not disclose the number of newly issued cards in 2009, but the credit card manager said the bank has seen an increase in the number of people who voluntarily closed their credit card accounts "due to factors such as job loss, migration and uncertainty about their financial future."
In response, the bank launched a customer assistance programme for retail borrowers during the year, a facility that covered credit card clients.
Bank customers pay a very high price for credit card debt, which ranges up to 49.75 per cent on JMD-denominated cards, and are subject to a range of transaction fees that the banks adjust periodically.
Metcalfe says FirstCaribbean, which offers a 45 per cent rate, experienced growth in its credit card portfolio in 2009.
"Indeed, there are individuals who are having difficulty repaying, but this has not significantly dampened our sales which have increased 13 per cent over prior year. In addition, billings have risen 11 per cent compared to 2008," he said.
"Once used wisely this is one of the cheapest forms of credit as consumers can get up to as much as 30-50 days free credit, depending on their usage and payment patterns."
Because of the soft market, Scotia-bank said it opted not to adjust rates or fees at yearend.
"Even though it is traditional that our rates are revised on November 1st of each year, for this November, no increases were announced," said Graham.
NCB similarly said it made no new rate adjustments since January 2009.