Credit Card Usage Remains Low

March 23, 2010

Although Census Bureau estimates indicate 181 million Americans will own credit cards this year, their usage rate remains low, according to recent research from compete.

Many Credit Card Owners Use Them 3x/Month or Less
Almost half of credit card owners only use them an average of three times a month or less. compete data indicates that 19% of credit card owners use them less than once a month, and another 28% use them one to three times a month. However, the largest single bloc of credit card owners (37%) uses them one to six times a week, and another 16% use credit cards seven or more times a week.

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Debit Cards Skew Younger, Female
A large proportion of credit card owners, 81%, also own debit cards. While debit card ownership often spurs greater usage of credit cards, it also means that four in five credit card owners have an alternative method of card-based payment.

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Debit card owners tend to be younger, with 86% of credit card owners ages 18-34 owning one compared to 79% of credit card owners ages 35-54 and 55% of credit card owners ages 55 and older. In addition, a greater percentage of female (83%) credit card owners also owns a debit card, compared to 75% of male credit card owners.

Interestingly, middle class credit card owners with a household income of $60,000 to $99,000 a year are the most likely to own a debit card (85%). This is followed by affluent credit card owners earning a household income of $100,000 or more (81%), and working class credit card owners earning a household income of less than $60,000 (74%).

Credit Cards Used for Infrequent, Expensive Purchases
Credit cards are generally used for travel and other more expensive, but less frequent, purchases. For comparatively less expensive products/services such as groceries or eating out, all three modes (credit, debit and cash) seem to be commonly used. However, debit cards seem to be more commonly used for such expenses as compared to cash. For smaller expenses like buying a coffee or for going for a movie, however, credit card holders still prefer to use cash.

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In essence, while credit cards have a broad distribution, debit cards are used for specific types of purchases and are not used frequently as substitutes. However, to increase frequency of use, credit card issuers could try to get more card holders to use their credit cards for smaller expenses like groceries, common personal items, as well as small daily expenses like a coffee.

Wallet Share Competition is Open
compete draws the following three key conclusions from this data:

  • The competition for share of wallet is still open. Although widely distributed, credit cards are still not the primary mode of payment.
  • Credit card issuers must target increasing the usage of each credit card, instead of just focusing on increasing number of credit card holders.
  • To do so, credit card issuers need to find different ways to make it more attractive for card holders to use credit cards for most expenses. Carving niches for usage may be one approach for card issuers to drive further differentiation and usage. For example, co-branding with frequently visited points of purchase may help drive more usage of their cards.

Revolving Consumer Credit in Downward Pattern
Although continued strong performance in the non-revolving U.S. consumer credit sector drove an increase in the overall U.S. consumer credit score for January 2010, revolving consumer credit, which mostly consists of credit card debt, fell 2.3% in January 2010. As reported by Retailer Daily, in some respects this drop may be seen as good news for credit card issuers, as it moderated a trend of severe revolving credit declines that included drops of 12.9%, 18.5% and 13.3% in the three preceding months.

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