Three Things We’re Hearing
- Surprising credit card preferences for younger consumers
- Younger consumers prefer choice in personal loans
- Consumer spending binge in late 2021?
A three-minute read
Surprising Credit Card Preferences for Younger Consumers
- Epic has surveyed consumers over the past year to assess their behaviors and preferences regarding financial services products
- We have segmented the results to show key differences between the preferences of younger consumers (those 18-44 years old) and older consumers (age 45+)
- Surprisingly, younger consumers are more likely (70%) to prefer having most of their financial products at one bank (vs. 60% for those 45+)
- When asked why they prefer to have their credit cards at their primary banks (i.e., the bank where they have their checking account) younger consumers cited “good rewards” and “convenience”
- Of those who did not have a card with their primary bank,
- 29% said rewards were not good enough
- 18% cited the lack of an appealing “acquisition incentive”, which they say needs to be at least $100
- When targeting younger consumers, banks should offer a cash back or “generic” travel rewards card
- 63% of younger consumers use a cash back card as their primary card (vs. 48% of the over 45 demographic)
- 23% report using a travel rewards card, however only 44% of those (10% of the total) use a card tied to one particular airline or hotel, so banks do not need a co-brand partner to have a successful travel rewards card
- Younger consumers are much more likely to open a new credit card account, with 40% saying they would consider acquiring a new card in the next three months vs. only 28% of the 45+ group
- The younger demographic also likes to use comparison websites (e.g., Credit Karma, Nerd Wallet) to acquire a card, with 62% having used one in the past year (however, a third of those using comparison sites end up going directly to the card issuer to apply)
Younger Consumers Prefer Choice in Personal Loans
- A similar look at preferences and behaviors of younger consumers as it relates to personal loans shows that they are 60% more likely to have taken out a personal loan in the past five years than the older segment
- Surprisingly, when compared to the older age group, younger consumers’ primary reason for needing a loan was more likely to be medical expense and less likely to be debt consolidation
- Younger consumers applied for loans with more lenders than older consumers
- However, younger consumers were actually less likely to use an online bank for their loans and were slightly more likely to use a bank with local branches
Consumer Spending Binge in Late 2021?
- As discussed in previous Epic Reports, the asset quality of credit card, personal loan, and other consumer credit assets has remained stubbornly stable during the pandemic-related economic downturn, as government stimulus programs have propped up incomes and changed consumer behavior has resulted in lower spending and higher savings
- Many government programs lapsed in the third and fourth quarter of 2020, however a recent Wall Street Journal article noted that the new round of government programs caused both household income and savings to rise in December for the first time in three months
- Economists generally expect spending to remain low in the early part of 2021, however as the pandemic recedes, pent-up demand and savings could result in a spending spike, helping credit card portfolios that have had significant balance declines in 2020
- Several issuers, including American Express, which has indicated it will spend a record amount on marketing in 2021, and Capital One, have notably increased their new account acquisition efforts to aid in resuming portfolio growth
Quick Takes
- Credit card and personal loan lenders who have resumed mailing are reporting significant response rate lifts since before the pandemic-related slow down
- Card response rates in some cases have been up as much as 100%
- Personal loan lenders report lifts of 25% - 50%
- Epic recently refreshed its proprietary response models, which provide between a 15% - 229% lift over generic bureau models (learn more here)
Thank you for reading.
The next Epic Report will publish on March 6th.
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Jim Stewart
www.epicresearch.net
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