How your junk mail shows if you're rich or poor

If you want to know what credit card companies think of you, look at your mail.  Are you “pre-screened” for lots of mileage-reward cards?  Banks think you’re rich and educated.  

Do you mostly see offers for low-APR teaser rates? Banks think you’re poor and uneducated — and, perhaps, vulnerable to financial traps.

To get ahead in a highly competitive industry, credit card companies have become increasingly sophisticated — and specific — about soliciting new customers. They have also learned to be savvy about wringing profits from their cardholders, even if that means taking advantage of people’s behavioral weaknesses.

The game happens before our very eyes. Recently, MIT economists Hong Ru and Antoinette Schoar analyzed over a million credit card mailings collected by Mintel, a company that pays people to read their junk mail. The economists scanned the terms of these offers and noted the income and education levels of recipients.

Their preliminary findings, based on data from 1999 to 2011, span a seismic shift in the credit card industry. The Card Act of 2009 curtailed many industry practices that legislators deemed most abusive — in particular, the law caps late fees, curbs sudden interest-rate increases and makes it harder to penalize people if they go over their credit limit. So the practices that might have been widespread a decade ago would be much less today.

Still, companies target their cards to maximize profits off different kinds of customers, and Ru and Schoar's data offer a unique window into the heyday of that practice not long ago, when banks had perhaps the greatest freedom to take advantage of people's bad habits.

These were the broad patterns the economists discovered: Richer people were more likely to get cash-back, point-reward or mileage offers. Poor people were more likely to get offers that advertise a low introductory APR.

Mileage cards tended to be marketed at college graduates, while cards with teaser APR rates were sent to the less educated. Cash-back and point-reward cards were offered equally to people at every education level. 

The innocent explanation for these trends is that banks offer people cards they are most likely to want (and qualify for). Different folks, after all, have different needs. But as Ru and Schoar dug deeper, they found that this wasn’t the whole story.

Cards with travel rewards epitomize the kind of product aimed at the rich and educated. It’s a fairly exclusive niche — only about 8 percent of credit card offers fall into this category. People in this demographic are the most likely to jet around, and therefore most likely to appreciate a card that will earn them frequent-flier miles. - Read More at Washingtonpost

How your junk mail shows if you’re rich or poor