Credit Card Issuers’ Biggest Rival May Already Be in the Wallet

Credit card issuers can lose a customer’s spending without losing the customer.

Among consumers who changed their primary credit card in the past two years, 58% made a card they already held their new primary card. Just 42% obtained a new card for that purpose, according to “The Switching Trigger,” a PYMNTS Intelligence report produced in collaboration with Elan.

New card offers are only part of the threat to transaction volume. A consumer with several open cards can move purchases from one issuer to another without filling out an application or closing an account. Declining card use an important signal in its own right. An account can remain open while another card gets the purchases, interchange and potentially the revolving balance that previously went to the primary card.

There are plenty of cardholders making those decisions. About 78 million U.S. adults, or 36% of credit cardholders, changed their primary card at least once during the previous 24 months. Fifty-two million did so more than once. As a read across, issuers don’t need to lose accounts to face competition for the transactions running through them.

The Decision Can Happen Quickly

Switchers generally aren’t conducting months-long searches across a large selection of cards.

Seventeen percent decided in less than a week, 29% took one to two weeks and 25% took three to four weeks. In all, 71% selected their new primary card within a month.

Their consideration sets were also small. Thirty-eight percent considered only the card they eventually chose. Another 40% compared it with just one alternative, meaning 78% seriously considered no more than two cards.

An existing card therefore has a built-in advantage that a prospective issuer doesn’t: The consumer already has access to it.

What gets that card used more often comes down partly to the economics of the product. Among switchers, 38% cited a better ongoing rewards rate as a reason for choosing another card, while 36% cited a higher available credit limit. Thirty percent pointed to a sign-up bonus, 26% to better travel benefits and 24% to a better mobile or digital experience.

For an issuer whose card is sitting in secondary position, those findings point to an opportunity to capture more of an existing customer’s spending. For the issuer currently holding primary position, they show how readily that spending can move elsewhere.

Losing Spend Without a Conversation

Issuers may get little warning directly from customers.

Forty-six percent of switchers had no contact with their previous issuer before changing their primary card. Another 37% initiated contact themselves, but 20% said the resulting offer wasn’t sufficient and 17% received no offer or resolution. Only 17% said their issuer initiated contact.

The retention offers issuers made also differed from what switchers said could have kept their business. Among the 335 switchers who received a retention attempt, 32% were offered a fee waiver or reduction and 31% a statement credit or cash back. Across all switchers, the leading responses for what could have kept them were a meaningful loyalty or retention bonus at 25%, a higher credit limit at 24% and a matched or improved rewards rate at 23%.

That leaves issuers competing for spending on two fronts. They have to defend the card customers use most while giving holders of their secondary cards reasons to move those products forward.  The account-opening battle gets much of the attention. For 58% of switchers, however, the card that won was already open.

At PYMNTS Intelligence, we work with businesses to uncover insights that fuel intelligent, data-driven discussions on changing customer expectations, a more connected economy and the strategic shifts necessary to achieve outcomes. With rigorous research methodologies and unwavering commitment to objective quality, we offer trusted data to grow your business. As our partner, you’ll have access to our diverse team of PhDs, researchers, data analysts, number crunchers, subject matter veterans and editorial experts.