You Are Pre-Approved–8 Billion Times

You Are Pre-Approved–8 Billion Times

By Elizabeth Warren

In 2005, Congress gave the credit industry what it wanted: tighter bankruptcy laws. In 2006, the credit industry responded: It mailed out 8 billion credit card solicitations –up 30% from 2005. It looks like if Congress will make it tougher to go bankrupt, then lenders will try harder to get people to borrow.

With about 110 million households in the US, that’s about 73 card offers per household. If the average card offers is about $5,000 in pre-approved credit, that’s about $365,000 in offers for every American household–or about $1000 a day, every day of the year.

By comparison, median household income is about $46,000, or about $127 a day. It wouldn’t be unreasonable to speculate that many families are offered about seven times their annual incomes in credit card debt. Of course, the mailings are the only offers that are counted. There are solitications in the malls, on college campuses, and stuck in magazines. They are on television, radio and the internet. I find credit card solitications in the bottom of the plastic bag every time I buy something at a nearby college bookstore.

8 billion credit card offers. Think of the postage. The paper. The possibilities. And think how profitable credit card lending must be to make it worthwhile to mail out 8 billion solicitations when the response rate is less than 0.3%.

Credit card companies are riding high–more lending and less worry that families in trouble will file for bankruptcy. Thanks to their friends in Washington, life is good.