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Fed rates and inflation have pushed consumer debt to new heights.

By December 5, 2023Mark's Minutes

The growth rate is slowing, but consumers added $73 billion in Q2 2023, bringing the total owed to lenders to $16.84 trillion, per Experian.

Average credit card balances now range from $3,000 to $8,000, and interest rates have surged to an average of 24%. Rising rates and balances are hitting consumers hard, and the impact is expected to worsen with the holiday season.

Solving the Problem with a 1, 2, 3 approach

1) Consolidation

Prepare for debt consolidation promotions now. As January’s credit card bills arrive, you want to be present with solutions to help.
Direct Mail Invitation: A comprehensive mailer/letter could include a small worksheet to help them identify their current debt challenges.
In-branch and Outdoor Merchandising: Expect to see consumers in January and February as they begin to feel the strain.
Outbound emails: Alerting consumers to the service options. You should include all accounts in these offers.

Help consolidate higher balances into a more convenient, lower-cost option. With most homeowners sitting on record equity balances, a home equity solution might be perfect for consolidating higher-rate loans.

2) Balance Transfer

Today, most consumers possess three or more credit cards. With increasing balances, many will consider consolidating to fewer cards. However, getting consumers to switch requires aggressive marketing and highlighting product benefits beyond lower rates.

According to Mercator Advisory Group’s Report: 2021, here are the most important factors users consider when choosing a credit card:
• 62% – no annual fee
• 50% – attractive points/rewards program
• 33% – a competitive APR
• 23% – strong fraud protective features
• 21% – good customer service

That means you will likely need to have many of these features to move consumers over to your card.

Letter checks are the best promotional approaches we have seen for a balance transfer campaign. The letter check presents a cashable check that can be used to pay off other loans.

3) Education

Like any major life event, correcting a family’s financial health involves a short-term transition like the above, along with some education to avoid this circumstance in the future. Many younger consumers may have yet to learn how to live within their means and will likely repeat this behavior in the future.

Support your efforts above with budgeting and account education programs. These are critical to creating a sound financial footing for your consumers over the long term.

Rely on Westamerica for Your 2024 Marketing Needs

As you finalize your priorities for 2024, remember that we’re in your corner with over 30 years of Financial Marketing experience.

And remember to download our marketing planner for some additional helpful tools. It’s free!