Exploring Consumer Views in the U.S. Towards Credit Cards


Navigator Edition: June 2014
By: Frank Martien

In December 2013, the Federal Reserve released a bulletin entitled “Consumer Experiences with Credit Cards.” Within this bulletin, the authors present a balanced and insightful view of how issuers and cardholders have been impacted by and have adjusted to the recent Great Recession and post-recession periods, including significant changes in regulations over this timeframe. A thorough review of this 36-page bulletin is beyond the scope of this article; however, several salient points are of particular interest for banks looking to launch or expand consumer credit card programs.

In Figure 1, consumers’ reasons for opening a credit card were examined. These reasons varied remarkably for consumers reporting they “almost always” pay their credit card balance in full versus those who do not. Not surprisingly, for the former segment, rewards was the most prevalent reason for opening a new credit card account versus making a specific purchase or rebuilding / increasing credit as primary reasons for the latter segment. Data were as of 2012; and one could speculate consumer reasons for opening new credit card accounts in 2014 may be comparable.

Figure 1: Reason for Opening Account in Last 12 Months
Fig-1_-Reason-for-Opening-Account-in-Last-12-MonthsSource: “Consumer Experiences with Credit Cards,” Federal Reserve Bulletin, December 2013 quoting 2012 Thomson Reuters/University of Michigan Surveys of Consumers.

As for time series data, the percentage of consumers with general purpose credit cards reporting multiple cards in wallet has increased substantially since 2000 as shown in Figure 2. Perhaps wider availability in credit card product options, including rewards options, has led some consumers to open multiple accounts or to segment spend to designated accounts based on merchant type, purchase type, or transaction size. Certainly, Durbin-related revisions impacting debit cards have also encouraged many banks to more actively promote credit cards as a means of mitigating reductions in overall payment card revenues.

Figure 2: Number of General Purpose Credit Cards
Fig-2_-Number-of-General-Purpose-Credit-CardsSource: “Consumer Experiences with Credit Cards,” Federal Reserve Bulletin, December 2013 quoting Thomson Reuters/University of Michigan Surveys of Consumers.

From the bulletin data, one can also see that reported transactor behaviors have increased from 2000 to 2012. In particular, the percentage of consumers reporting they “almost always” pay their credit card balance in full each month has increased from 50% to 62% underscoring the simultaneous increased availability of and awareness for rewards-based cards.

Figure 3: Credit Card Payment Behaviors
Fig-3_-Credit-Card-Payment-BehaviorsSource: “Consumer Experiences with Credit Cards,” Federal Reserve Bulletin, December 2013 quoting Thomson Reuters/University of Michigan Surveys of Consumers.

In summary, this bulletin helps to provide empirical support for numerous opinions and anecdotal observations regarding how credit card issuers and consumers have reacted to major events, such as tightening in credit card regulation and increased disclosures in the midst and aftermath of a major recession. The bulletin implies significant flexibility and adaptability on behalf of both issuers and consumers to highlight the resiliency and continued relevance of credit cards in today’s economy.

For more information, please contact Frank Martien, Partner, specializing in Commercial Payments, frank.martien@firstannapolis.com.

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