How can credit card companies afford to offer big sign-up bonuses?
Credit card companies cannot afford to not offer big sign-up bonuses. People are by-and-large “creatures of habit,” momentum, inertia. If they are pleased, or at least not significantly displeased with their current credit cards, then these individuals will not apply for, let alone switch to a credit card new to them. Furthermore, these individuals will neither seek out information nor even notice information about a potential new credit card.
Consumers not significantly displeased with their current credit cards develop what can be called “perceptual barriers.” There are simply too many stimuli, too many marketing messages, too many products in the typical person’s life for those persons to notice, let alone act upon. Accordingly, for the cognitive comfort of these persons, their perceptual barriers screen out most stimuli that are not rather directly pertinent to the person. Credit card companies must break through these perceptual barriers to grab the notice and then the attention of these persons, who are generally content with using their current credit cards.
How important are limited-time promotions to credit card application rates?
Promotions, to be cost-effective, must be limited-time promotions that set time limits for applications. The cognitive capacity of credit card users, as for all consumers, is not unlimited. One consequence is the tendency to continue the status quo. Even if a credit card new to an individual is appealing, individuals most commonly will delay taking action to obtain that new credit card, regardless how little or how great the necessary action might be on the part of the individual to obtain that new credit card. A readily apparent time limit motivates the typical individual in two ways.
First, well aware of their unrelated demands, opportunities, and activities in their lives, such individuals will take the action sooner rather than later, with the mindset to get it out of their so-called list of things to do, and to avoid a last-minute situation leading up to the time limit deadline when their standard recurring life demands, opportunities, and activities might push out this attractive new credit card. Second, individuals to whom the noted new credit card appeals and who are true procrastinators will, as the time deadline arrives, push aside other things in their life in order to not miss the attractiveness of this new credit card.
Are bonus-seekers good customers for credit card companies?
Bonus-seekers are good customers for credit card companies. To begin, new customers, particularly those drawn to a new credit largely due to an accompanying bonus, will come aboard with enthusiasm. This enthusiasm is not contained only within the minds of these customers. These customers, enthusiastic for whatever reasons about the new credit card, will share their positive sentiment with family, friends, and colleagues closest to them.
In other words, these customers will explicitly call to the attention of family, friends, and colleagues, the benefits of this new credit card. In turn, a portion of those family, friends, and colleagues will take action accordingly to obtain the new credit card. Ultimately, even if the original enthusiastic new customers move on to their next bonus offering elsewhere (and not all will), a much larger and significant portion of those individuals can be certain to continue with their new credit card, and not move on to chase down some next bonus, as well might their respective family member, friend, colleague who introduced them, call their attention to the new credit card.
What does the value of credit card sign-up bonuses tell us about the economy?
The value of credit card sign-up bonuses signals little, if anything, about the economy. In bad economic times, consumers might have an increased alertness and openness to a new credit card if it includes a reasonably sized sign-up bonus. However, in bad economic times, consumers also tend to be less adventurous than in good economic times, with greater tendency to avoid risk that might be associated with trying something new. Alternatively, in good economic times, consumers generally tend to be of analogously good or elevated state of mind, with then accompanying more adventurous tendency and openness to try new things that certainly apply to obtaining a new credit card to add to their purses and wallets.