The issues surrounding of credit is such a hot topic these days. The ever changing regulations and the rise of consumer debt create constant controversy over the use of consumer credit. The use and abuse of the credit cards run both ends of the spectrum. Some spend without limit and end up in debt. Others who fear the instability of the economy may have taken a hard stop approach to liberal card use out of fear. Either scenario poses a threat to the credit card industry that will force card companies to target new and untapped markets to ensure survival.
Several factors have had a significant impact on why, how and how often Americans turn to the credit card, or turn against it. Despite the battle between spending and not spending, the credit card industry has a need to protect themselves by ensuring that they continue to make money from people who will use credit and pay the company to do so. This is the way the game works. Young adults are a largely untapped market because up to now no credit was considered a risk in the industry.
On one side of the spectrum there are many people in debt. These individuals are considered a risk because they pose a potential loss to the credit card company. They can no longer spend but cannot afford to pay off debts either. If these individuals who are in debt can’t pay this off, the credit card company will be forced to write that off as a loss. Those who have stopped using the card are no longer valuable players in the credit card industry.
The Effects of the CARD Act
The recently imposed credit card act put additional pressure on the industry because laws and practices were imposed about how when and why fees can be set. The CARD act was instituted in an effort to protect consumers; however it also motivated the industry to find new ways to make money. If the card companies can no longer make the rules about fees they are at a disadvantage that will potentially affect the bottom line. This may just mean marketing to uncharted territories such as youth and borrowers with no credit.
The credit card industry has been criticized heavily since the new CARD act went into effect. It is reported that card companies have and will continue to find creative ways around the rules in an effort to off set losses that they will face due to having these regulations imposed on the practice of fees and charges. Consumer complaints are at big high, only months into the new CARD act.
One of the ways that the industry is thought to find a way around potential income loss is to find new target markets; it seems that young adults just may be an untapped market for the credit card industry.
The Birth of a New Card
The Citi Forward Card is a card that was introduced in 2009 prior to the CARD act being introduced as law. Most credit card companies, after hearing about the pending legislation worked hard to make changes to their practices to take advantage of the freedoms available prior to the new laws taking affect. This meant increased charges, and unlimited fee hikes for current card holders.
Citi Forward is a fairly new card that is specifically designed to appeal to a younger generation. It is coined to reward young cardholders for financial responsibility and offer unique points and benefits for spending that is typical in the age group of a young adult. The credit card industry despite the changes to the regulations has found a new target market that can take the place of those high risk users, those who have maxed out credit limits or the non-users. MySpace was one of the platforms used by City Forward to heavily target the younger crowd that is internet savvy, possibly in school, and spends money on entertainment. The card took the idea of the rewards program and tailored it to a younger crowd and then incentivizes them for spending in areas that they tend to spend it anyway.
The Citi Forward card offers the following incentives:
• Bonus points for using the card on dining out, gym memberships, internet and cell phone bills, entertainment, books and educational expenses.
• Unique rewards formula that offers points for every dollar spend on certain categories.
• Sign up bonus that offers incentives for spending for specific time frames.
• Points for using paperless statements and account management.
• No annual fee.
• Bonuses for paying bills on time.
The Status
The consumer reviews offer positive feedback on the Citi Forward Card since its birth in 2009. The incentive programs provided by the card do seem to market to and reward the traditional youthful spending patterns. For its purpose the card appears to have done its job for the credit card company as well as the users. As the new CARD act continues to unfold and Citi Forward users continue to age and change it will be interesting to see if the new younger market will find themselves still feeling positive about their experiences with the Citi Forward Card.
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