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Credit and Debit Cards - US - July 2011

  • What opportunities are credit card issuers missing amongst certain demographics?
  • How can banks encourage consumers to borrow again?
  • What are the latest industry developments? How may they impact consumer behaviour?
  • What are the preferred cards of consumers and what do they look for when choosing?
  • What schemes can help credit and debit card issuers increase their uptake?
  • What are the current marketing strateges and initiatives being used in the credit and debit card market?

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Table of contents

  1. Scope and Themes

      • What you need to know
        • Data sources
          • Consumer survey data
            • VMS
              • Abbreviations and terms
                • Terms
                  • Companies mentioned in this report
                  • Executive Summary

                    • Industry overview
                      • How new industry developments may impact consumer behavior
                        • The consumer and rewards
                          • The consumer and their preferred cards
                            • Satisfaction with the industry
                              • Industry marketing strategies
                                • Who are the innovators?
                                • Insights and Opportunities

                                    • Key points
                                      • Credit card issuers are missing opportunities with black consumers
                                        • To stay profitable, banks need to get consumers to borrow again
                                        • Inspire Trends

                                            • Trend: Prepare for the worst
                                              • What we’ve seen
                                                • Industry application
                                                  • Implications
                                                  • Market Size and Forecast

                                                    • Key points
                                                      • Transaction volume rises 8%, while credit card debt continues to fall
                                                        • Figure 1: Debit and credit card volume, 2010 versus 2009
                                                      • Visa boosts its share of the market
                                                        • Credit card outstandings in steep decline
                                                          • Outstandings fall sharply among major issuers
                                                              • Figure 2: Credit card loan outstandings at the largest banks, Q1 2011
                                                          • Competitive Context

                                                            • Key points
                                                              • Debit’s share of market continues to grow
                                                                • Figure 3: Credit vs. debit, market shares, 2010 versus 2009
                                                              • Buying, borrowing on credit cards drops sharply in 2010
                                                                • Shift to debit has been going on for several years
                                                                  • Figure 4: Noncash payment volumes and share, 2006 and 2009
                                                                • Top nine banks control about 70% of credit card market
                                                                  • Figure 5: Market shares of top credit card issuers, Q1 2011
                                                              • Segment Performance

                                                                • Key points
                                                                  • Credit card income soars as bad-debt figures show sharp recovery
                                                                    • Figure 6: Net income at largest credit card bank operations, Q1 2011
                                                                    • Figure 7: Credit card net chargeoffs at commercial banks, Q1 2011
                                                                    • Figure 8: Credit card net chargeoff percentage at commercial banks, Q1 2011
                                                                  • Chargeoffs remain high by historical standards
                                                                    • JPMorgan Chase sees the biggest improvement
                                                                      • Revenue falls 10% as receivables decline
                                                                          • Figure 9: Credit card revenue at top banks, Q1 2011
                                                                      • Marketing Channels

                                                                        • Key points
                                                                          • 75% of credit card executives see social media as “significant factor”
                                                                            • Discover offers $50 bonuses for new customer referrals
                                                                              • Capital One, Amex use social media to promote travel
                                                                              • Market Drivers—The Regulatory Environment

                                                                                • Key points
                                                                                  • Debit fees or reduced rewards could shift share back to credit cards
                                                                                    • The Durbin Amendment and Regulation E
                                                                                      • Reduced debit interchange likely to mean higher fees or lower rewards
                                                                                        • Strong consumer resistance to debit card fees
                                                                                          • Several big banks reduce or eliminate debit rewards
                                                                                            • Banks also hit by reduced overdraft fee revenue
                                                                                            • Leading Companies

                                                                                              • Key points
                                                                                                • Bank of America
                                                                                                  • JPMorgan Chase
                                                                                                    • Citigroup
                                                                                                      • American Express
                                                                                                        • Discover
                                                                                                          • HSBC
                                                                                                            • Wells Fargo
                                                                                                              • U.S. Bank
                                                                                                              • Innovation and Innovators

                                                                                                                • Key points
                                                                                                                  • Wells Fargo, Chase roll out first U.S. cards with EMV chip technology
                                                                                                                    • Capital One doles out 1 billion miles in “Match My Miles” challenge
                                                                                                                      • Are you paying with points, or should I put it on your credit card?
                                                                                                                        • PNC launches credit cards with bonus rewards for checking customers
                                                                                                                          • Citigroup tests shopping application tied to its credit cards
                                                                                                                            • First Internet Bank launches debit rewards through online banking site
                                                                                                                              • AisleBuyer Offers Card-Scanning Mobile Phone Application
                                                                                                                                • Mobile software enables CU members to “Cre8” instant personalized cards
                                                                                                                                • Marketing Strategies

                                                                                                                                  • Key points
                                                                                                                                    • Credit card issuers try to spur reluctant consumers to borrow again
                                                                                                                                      • Cash-back rewards heavily promoted
                                                                                                                                        • Representative direct and electronic mail advertising
                                                                                                                                          • AARP Visa Card from Chase
                                                                                                                                            • Figure 10: AARP/Chase email ad, May 2011
                                                                                                                                          • Discover Card from Discover
                                                                                                                                            • Figure 11: Discover direct mail ad, April 2011
                                                                                                                                          • Chase Freedom credit card from Chase
                                                                                                                                            • Figure 12: Chase direct mail ad, April 2011
                                                                                                                                          • Cash rewards Visa card from Bank of America
                                                                                                                                            • Figure 13: Bank of America Cash Reward Card direct mail ad, April 2011
                                                                                                                                          • Capital One Venture Card from Capital One
                                                                                                                                            • Figure 14: Capital One Venture Card direct mail ad, April 2011
                                                                                                                                          • Citi ThankYou Premier Card from Citibank
                                                                                                                                            • Figure 15: Citi ThankYou Premier Card direct mail ad, April 2011
                                                                                                                                          • GM Card from HSBC
                                                                                                                                            • Figure 16: HSBC GM Card direct mail ad, April 2011
                                                                                                                                          • Orchard Bank MasterCard from HSBC
                                                                                                                                            • Figure 17: Orchard Bank/HSBC MasterCard electronic mail ad, May 2011
                                                                                                                                          • TrueEarnings Card from American Express
                                                                                                                                            • Figure 18: American Express TrueEarnings Card direct mail ad, April 2011
                                                                                                                                          • Slate Card from Chase
                                                                                                                                            • Figure 19: Chase Slate Card with Blueprint direct mail ad, April 2011
                                                                                                                                          • Ace Rewards Platinum Visa Card from U.S. Bank
                                                                                                                                            • Figure 20: U.S. Bank Ace Rewards Platinum Visa Card direct mail ad, April 2011
                                                                                                                                          • Wells Fargo Home Rebate Card from Wells Fargo
                                                                                                                                            • Figure 21: Wells Fargo Home Rebate Card direct mail ad, April 2011
                                                                                                                                          • Notable television advertising
                                                                                                                                            • Figure 22: Regions Bank Visa Check Card, 2011
                                                                                                                                            • Figure 23: Perkstreet.com Financial Visa Debit Card, 2010
                                                                                                                                            • Figure 24: Discover, 2011
                                                                                                                                            • Figure 25: Discover, 2011
                                                                                                                                            • Figure 26: Chase Marriott Rewards Premium Credit Card, 2011
                                                                                                                                            • Figure 27: Bank of America Cash Rewards Credit Card, 2011
                                                                                                                                            • Figure 28: Chase Freedom Card, 2011
                                                                                                                                            • Figure 29: Capital One Venture Card, 2010
                                                                                                                                            • Figure 30: American Express Premier Rewards Gold Card, 2010
                                                                                                                                        • The Consumer and Debit Fees

                                                                                                                                            • Key points
                                                                                                                                              • Two thirds say they would switch if their bank charged a debit card fee
                                                                                                                                                  • Figure 31: Attitudes about debit cards and fees, by gender, March 2011
                                                                                                                                                • Scope for growth of prepaid cards among the young
                                                                                                                                                    • Figure 32: Attitudes about debit cards and fees, by age, March 2011
                                                                                                                                                  • Banks risk alienating higher earners with debit card fees
                                                                                                                                                    • Figure 33: Attitudes toward debit card fees, by income, March 2011
                                                                                                                                                  • Whites show greater propensity to move accounts
                                                                                                                                                    • Figure 34: Attitudes toward debit card fees, by race and Hispanic origin, March 2011
                                                                                                                                                • Consumers and Mobile Payments

                                                                                                                                                  • Key points
                                                                                                                                                    • Little interest in using mobile phones as payment devices
                                                                                                                                                      • Figure 35: Attitudes about mobile payments, debit card holders, by gender, March 2011
                                                                                                                                                    • Greater acceptance among the young—but only just
                                                                                                                                                      • Figure 36: Attitudes about mobile payments, debit card holders, by age, March 2011
                                                                                                                                                    • Highest earners are the most concerned about security
                                                                                                                                                      • Figure 37: Attitudes about mobile payments, debit card holders, by income, March 2011
                                                                                                                                                    • Greater acceptance among Asians?
                                                                                                                                                      • Figure 38: Attitudes about mobile payments, debit card holders, by race/Hispanic origin, March 2011
                                                                                                                                                  • Rewards Programs

                                                                                                                                                    • Key points
                                                                                                                                                      • Cash and points are most popular types of credit card reward
                                                                                                                                                        • Figure 39: Types of credit card(s) owned, by gender, March 2011
                                                                                                                                                      • Credit usage increases with age…
                                                                                                                                                        • Figure 40: Types of credit card(s) owned, by age, March 2011
                                                                                                                                                      • …and income
                                                                                                                                                        • Figure 41: Types of credit card(s) owned, by household income, March 2011
                                                                                                                                                      • Half of all black respondents don’t own a credit card
                                                                                                                                                        • Figure 42: Types of credit card(s) owned, by race/Hispanic origin, March 2011
                                                                                                                                                      • Rewards are far less common on debit cards
                                                                                                                                                        • Figure 43: Types of debit card(s) owned, by gender, March 2011
                                                                                                                                                      • Older people relying on credit rather than debit cards
                                                                                                                                                        • Figure 44: Types of debit card(s) owned, by age, March 2011
                                                                                                                                                    • Credit Cards—Usage Frequency and Favorite Brands

                                                                                                                                                      • Key points
                                                                                                                                                        • Most consumers use one or two credit cards a month…
                                                                                                                                                          • Figure 45: Number of credit cards used in a typical month, by gender, March 2011
                                                                                                                                                        • …and age has little bearing on the number of cards used
                                                                                                                                                          • Figure 46: Number of credit cards used in a typical month, by age, March 2011
                                                                                                                                                        • Highest earners mix and match their card usage
                                                                                                                                                          • Figure 47: Number of credit cards used in a typical month, by household income, March 2011
                                                                                                                                                          • Figure 48: Number of credit cards used in a typical month, by race and Hispanic origin, March 2011
                                                                                                                                                        • Urbanites are the least likely to stay loyal to one card
                                                                                                                                                          • Figure 49: Number of credit cards used in a typical month, by area, March 2011
                                                                                                                                                        • Chase is most popular brand of credit card
                                                                                                                                                          • Figure 50: Brand of primary credit card company, by gender, March 2011
                                                                                                                                                          • Figure 51: Brand of primary credit card company, by age, March 2011
                                                                                                                                                        • Amex shows its strength among affluent consumers
                                                                                                                                                          • Figure 52: Brand of primary credit card company, by income, March 2011
                                                                                                                                                          • Figure 53: Brand of primary credit card company, by race and Hispanic origin, March 2011
                                                                                                                                                      • General Attitudes about Credit Cards

                                                                                                                                                        • Key points
                                                                                                                                                          • Most are confident about their credit score
                                                                                                                                                            • Figure 54: Attitudes about credit cards, credit card holders, by gender, March 2011
                                                                                                                                                          • Older people far more careful with their card use
                                                                                                                                                              • Figure 55: Attitudes toward credit cards, credit card holders, by age, March 2011
                                                                                                                                                            • Even low earners are more likely than not to clear their balance
                                                                                                                                                              • Figure 56: Attitudes about credit cards, credit card holders, by household income, March 2011
                                                                                                                                                            • Signs of credit strain among black respondents
                                                                                                                                                              • Figure 57: Attitudes toward credit cards, by race and Hispanic origin, March 2011
                                                                                                                                                            • The link between location and credit use
                                                                                                                                                              • Figure 58: Attitudes toward credit cards, by census region, March 2011
                                                                                                                                                              • Figure 59: Attitudes toward credit cards, by geographic area, March 2011
                                                                                                                                                          • Customer Satisfaction—Credit and Debit Cards

                                                                                                                                                            • Key points
                                                                                                                                                              • Women score higher for almost every attribute—positive and negative
                                                                                                                                                                • Figure 60: Attributes describing primary credit card, by gender, March 2011
                                                                                                                                                                • Figure 61: Attributes used to describe primary credit card, mean of responses by gender, March 2011
                                                                                                                                                                • Figure 62: Attributes used to describe primary credit card, by gender and income, March 2011
                                                                                                                                                                • Figure 63: Attributes used to describe primary credit card, mean of responses by gender and income, March 2011
                                                                                                                                                              • Are older people getting better service from their issuer?
                                                                                                                                                                • Figure 64: Attributes used to describe primary credit card, by age, March 2011
                                                                                                                                                                • Figure 65: Attributes used to describe primary credit card, mean of responses by age, March 2011
                                                                                                                                                              • Evidence of dissatisfaction among black respondents
                                                                                                                                                                • Figure 66: Attributes used to describe primary credit card, by race and Hispanic origin, March 2011
                                                                                                                                                                • Figure 67: Attributes used to describe primary credit card, mean of responses by age and Hispanic origin, March 2011
                                                                                                                                                              • Debit card issuers also get high marks from consumers
                                                                                                                                                                  • Figure 68: Attributes used to describe primary debit card, by gender, March 2011
                                                                                                                                                                  • Figure 69: Attributes used to describe primary debit card, by gender, March 2011
                                                                                                                                                                  • Figure 70: Attributes used to describe primary debit card, by gender and income, March 2011
                                                                                                                                                                  • Figure 71: Attributes used to describe primary debit card, mean of responses by gender and income, March 2011
                                                                                                                                                                • Older people less likely to see debit cards as an essential
                                                                                                                                                                  • Figure 72: Attributes used to describe primary debit card, by age, March 2011
                                                                                                                                                                  • Figure 73: Attributes used to describe primary debit card, mean of responses by age, March 2011
                                                                                                                                                                  • Figure 74: Attributes used to describe primary debit card, by age, March 2011
                                                                                                                                                                • Asians are markedly less positive about their debit card provider
                                                                                                                                                                  • Figure 75: Attributes used to describe primary debit card, by race and Hispanic origin, March 2011
                                                                                                                                                                  • Figure 76: Attributes used to describe primary debit card, mean of responses by race and Hispanic origin, March 2011
                                                                                                                                                                • Most customers are very or somewhat satisfied with their cards
                                                                                                                                                                  • Figure 77: Level of satisfaction with credit and debit card company, by gender, March 2011
                                                                                                                                                                  • Figure 78: Level of satisfaction with credit and debit card company, mean of responses by gender, March 2011
                                                                                                                                                                • Seven in 10 older than 55 are “very satisfied” with their primary card
                                                                                                                                                                  • Figure 79: Level of satisfaction with credit and debit card company, by age, March 2011
                                                                                                                                                                  • Figure 80: Level of satisfaction with credit and debit card company, mean of responses by age, March 2011
                                                                                                                                                                  • Figure 81: Level of satisfaction with credit and debit card company, by age, March 2011
                                                                                                                                                                  • Figure 82: Level of satisfaction with credit and debit card company, mean of responses by age, March 2011
                                                                                                                                                                • Are higher earners expecting more from their card provider?
                                                                                                                                                                  • Figure 83: Level of satisfaction with credit and debit card company, by income, March 2011
                                                                                                                                                                  • Figure 84: Level of satisfaction with credit and debit card company, mean of responses by income, March 2011
                                                                                                                                                                • A tale of two cards—strong contrast between debit and credit card satisfaction
                                                                                                                                                                  • Figure 85: Level of satisfaction with credit and debit card company, by race and Hispanic origin, March 2011
                                                                                                                                                                  • Figure 86: Level of satisfaction with credit and debit card company, mean of responses by race and Hispanic origin, March 2011
                                                                                                                                                              • Cluster Analysis

                                                                                                                                                                  • Cluster 1: Desirable and Dissatisfied
                                                                                                                                                                    • Characteristics
                                                                                                                                                                      • Demographics
                                                                                                                                                                        • Opportunity
                                                                                                                                                                          • Cluster 2: Transactors
                                                                                                                                                                            • Characteristics
                                                                                                                                                                              • Demographics
                                                                                                                                                                                • Opportunity
                                                                                                                                                                                  • Cluster 3: Trusting Revolvers
                                                                                                                                                                                    • Characteristics
                                                                                                                                                                                      • Demographics
                                                                                                                                                                                        • Opportunity
                                                                                                                                                                                          • Characteristic tables
                                                                                                                                                                                            • Figure 87: Credit and debit card clusters, March 2011
                                                                                                                                                                                            • Figure 88: Attributes describing credit cards, means for all responses, by credit and debit card clusters, March 2011
                                                                                                                                                                                            • Figure 89: Level of satisfaction with current debit and credit card, by credit and debit card clusters, March 2011
                                                                                                                                                                                            • Figure 90: Attitudes about credit cards. by credit and debit card clusters, March 2011
                                                                                                                                                                                            • Figure 91: Attributes describing debit cards, means for all responses by credit and debit card clusters, March 2011
                                                                                                                                                                                            • Figure 92: Attitudes concerning debit cards and mobile payments, by credit and debit card clusters, March 2011
                                                                                                                                                                                            • Figure 93: Credit and debit card clusters, by gender, March 2011
                                                                                                                                                                                            • Figure 94: Credit and debit card clusters, by age, March 2011
                                                                                                                                                                                            • Figure 95: Credit and debit card clusters, by household income, March 2011
                                                                                                                                                                                            • Figure 96: Credit and debit card clusters, by race, March 2011
                                                                                                                                                                                            • Figure 97: Credit and debit card clusters, by Hispanic origin, March 2011
                                                                                                                                                                                            • Figure 98: Credit and debit card clusters by smartphone ownership, March 2011
                                                                                                                                                                                          • Cluster methodology
                                                                                                                                                                                          • Key Driver Analysis

                                                                                                                                                                                              • Key drivers
                                                                                                                                                                                                • Key driver methodology
                                                                                                                                                                                                  • Figure 99: Key driver (correlation) analysis, March 2011
                                                                                                                                                                                              • Appendix—Trade Associations

                                                                                                                                                                                                Companies Covered

                                                                                                                                                                                                • Bank of America Corporation
                                                                                                                                                                                                • Barclaycard
                                                                                                                                                                                                • Bureau of Economic Analysis
                                                                                                                                                                                                • Consumer Bankers Association
                                                                                                                                                                                                • Consumer Electronics Association
                                                                                                                                                                                                • Credit Union National Association
                                                                                                                                                                                                • Federal Deposit Insurance Corporation
                                                                                                                                                                                                • Harley Davidson, Inc
                                                                                                                                                                                                • Hilton Hotels Corporation
                                                                                                                                                                                                • HSBC USA Inc.
                                                                                                                                                                                                • Independent Community Bankers of America
                                                                                                                                                                                                • National Association Of Federal Credit Unions
                                                                                                                                                                                                • National Credit Union Administration
                                                                                                                                                                                                • Southwest Airlines Co.
                                                                                                                                                                                                • The American Bankers Association
                                                                                                                                                                                                • The American Financial Services Association
                                                                                                                                                                                                • Walmart Stores (USA)
                                                                                                                                                                                                • Washington Mutual Inc
                                                                                                                                                                                                • Wells Fargo & Company

                                                                                                                                                                                                Credit and Debit Cards - US - July 2011

                                                                                                                                                                                                £3,277.28 (Excl.Tax)