Credit Cards: Loyalty and Retention - US - November 2007

Table of Contents

• Scope and Themes
• What you need to know
• Scope of this report
• Abbreviations and terms
• Abbreviations
• Terms
• Executive Summary
• Industry snapshot
• Current marketing trends
• The credit card consumer
• The consumer by income and risk score
• Competitive landscape
• Recommendations
• Market Drivers
• Consumer and credit card debt
  • Figure 1: Total U.S. transaction volume, fiscal year ending September 30, 2004
• Rewards card usage
  • Figure 2: Type of cards typically used, 2003 and 2007
  • Figure 3: Type of "special" cards typically used, 2003 and 2007
• Payment behavior
  • Figure 4: Consumer payment systems, by method of payment, 2000-08
  • Figure 5: Number of cardholders and cards, spending and outstanding debt, 2000-08
  • Figure 6: Payment behavior, October 2007
  • Figure 7: Payment behavior, by age, October 2007
• Challenges to retention
• Non-redemption
  • Figure 8: Preferred rewards, August 2006
• Commoditization of rewards programs
• Market saturation
  • Figure 9: Frequency of application for credit card(s), by income, February 2006
• The economy
  • Figure 10: Credit card charge-offs, 2006
  • Figure 11: Credit card charge-offs, January-September 2007
• Marketing trends
• Interchange rates
• Competitive Landscape
• Card Issuer size
  • Figure 12: Top ten issuers of general-purpose credit cards, year-end 2006
  • Figure 13: Credit card issuers ranked by receivables, year-end 2005 and 2006
• Market share and usage
  • Figure 14: Market share ranked, by major card type, year-end 2006
  • Figure 15: Card usage, by card type, 2001 and 2007
• American Express
• MasterCard
• Visa
• Discover
• Current usage
  • Figure 16: Issuers of cards used most often, by gender, October 2007
  • Figure 17: Issuers of cards used most often, by age, October 2007
  • Figure 18: Cards used most often, by income, October 2007
• Customer satisfaction
  • Figure 19: Credit card customer satisfaction, June and July 2007
• Customer satisfaction--Rewards programs
  • Figure 20: Perceived impact and influence of rewards programs, by demographic categories, April 2007
  • Figure 21: Financial services behavior in the past 12 months motivated by rewards, April 2007
• Cross-selling
• Balance transfers
  • Figure 22: Average promotional offer APR (%), Q1 2004-Q1 2007
  • Figure 23: Promotional offer length (months), Q1 2004-Q1 2007
• Balance transfer check mailings
• Convenience checks
• Targeting the unbanked
• Small businesses
  • Figure 24: Rewards valued by small business owners, 2007
  • Figure 25: Rewards offered to businesses, by company, Q2 2007
• Reward preferences
  • Figure 26: Examples of credit card rewards offerings, by age, June 2007
  • Figure 27: Reasons for choosing a particular card, by income, October 2007
• Debit rewards programs
• Loyalty-focused reward trends
• Non-reward rewards
• Innovations in rewards programs
• Instant rewards
• In-house redemption
• Other programs
• Direct mail promotional activity
• The Credit Card Consumer
• Number of cards used
  • Figure 28: Number of cards used in the last 60 days, by gender, October 2007
  • Figure 29: Number of cards carried, by age, October 2007
  • Figure 30: Number of cards carried, by income, October 2007
  • Figure 31: Number of cards carried, by race/ethnicity, October 2007
• Reasons for using a specific card
  • Figure 32: Reasons for using a specific card, by gender, October 2007
  • Figure 33: Reasons for using a specific card, by age, October 2007
  • Figure 34: Reasons for using a specific card, by income, October 2007
  • Figure 35: Reasons for using a specific card, by race/ethnicity, October 2007
• Growth of debit cards
  • Figure 36: Debit card holders, 2000-08
  • Figure 37: Payment methods for transactions of varying sizes, 2007
  • Figure 38: Users of debit reward cards, by age, 2006
• Debit card rewards
  • Figure 39: How rewards would increase debit card usage, 2006
• Marketing for retention
• Balance transfers
  • Figure 40: Credit card payment behavior, by age, October 2007
  • Figure 41: Credit card payment behavior, by income, October 2007
  • Figure 42: Credit card payment behavior, by race/ethnicity, October 2007
  • Figure 43: Balance transfer activity, by race/ethnicity, October 2007
• The Credit Card Consumer with Risk Score and Investable Assets
• By risk score
  • Figure 44: Investable assets, by self-reported risk score, September 2007
  • Figure 45: Number of times checked risk score in the last 12 months, by self-reported risk score, September 2007
  • Figure 46: Number of general-purpose credit cards used in the last 60 days, by self-reported risk score, September 2007
  • Figure 47: Reason for using primary card, by self-reported risk score, September 2007
  • Figure 48: Credit card payment behavior, by self-reported risk score, September 2007
  • Figure 49: Change in credit card payment behavior, by self-reported risk score, September 2007
  • Figure 50: Response rate, HELOC usage, balance transfers, and credit card offer comparison behavior, by self-reported risk score, September 2007
• By investable assets
  • Figure 51: Number of general-purpose credit cards used in the last 60 days, by investable assets, September 2007
  • Figure 52: Reason for using primary card, by investable assets, September 2007
  • Figure 53: Credit card payment behavior, by investable assets, September 2007
  • Figure 54: Change in credit card payment behavior, by investable assets, September 2007
  • Figure 55: Response rate, HELOC usage, balance transfers, and credit card offer comparison behavior, by investable assets, September 2007
• Advertising and Promotion
• Direct mail
  • Figure 56: Top ten debit card direct mail companies, 2004-06, ordered by 2005 volume
• Internet
  • Figure 57: Percentage of adults online, by gender, age, race/ethnicity and income, 2007
• Email
• Increased segmentation in marketing
• The affluent
• Teens
  • Figure 58: Bank product ownership, by age, 2007
  • Figure 59: Teenagers who have used a credit card in the past 12 months, by type of transaction, by age, 2006
• Graduate students
• Marketing to graduate students
• Generation Plastic
  • Figure 60: Share of dollars spent using plastic, by age, August 2006
• Future Trends
• More targeted marketing, less mass mailing
• Increased electronic marketing
• Increasingly sophisticated technology
• Creativity in rewards programs
• Relationship banking
• Small business rewards
• Appendix: Advertising and Promotion
  • Figure 61: Banco Popular debit card mailing, September 2007
  • Figure 62: American Express email retention mailing, 2007
  • Figure 63: Washington Mutual direct mail retention mailing, 2007
  • Figure 64: Visa Print ad in the San Jose Mercury News, September 2007
  • Figure 65: American Express reward Print advertisement, 2007
  • Figure 66: Visa check card experiential rewards advertisement, 2007
  • Figure 67: Example of reminder email from Orchard Bank/HSBC
  • Figure 68: Capital One rewards redemption reminder, October 2007
  • Figure 69: Citi Dividend Platinum Select card balance transfer direct mail advertisement, October 2007
  • Figure 70: Wells Fargo/PG&E debit card direct mail advertisement, 2007
  • Figure 71: Discover credit limit increase notification letter, October 2007
  • Figure 72: Southwest Bank Platinum check card, July 2007
  • Figure 73: American Express/Costco co-branded card, October 2007
  • Figure 74: Union Bank debit direct mail advertisement, 2007
  • Figure 75: Eagle Federal Credit debit rewards card print advertisement, 2007
  • Figure 76: Visa debit card print advertisement, 2007
  • Figure 77: College reward Visa card mailed in February and March 2007
  • Figure 78: Chase convenience check mailing, April 1007
  • Figure 79: Union Bank convenience check mailing, August 2007