Musicians frequently sing about the cures, ails, and significance of money, imparting lessons for careful listeners with every doo-wop.
“Money can’t buy me love,” sang The Beatles, although Cyndi Lauper thinks “Money Changes Everything.”
Shirley Bassey sought a “Big Spender,” Madonna is a “Material Girl,” and the Steve Miller Band advises listeners to “Take the Money and Run.”
According to Donna Summer, “She Works Hard for the Money”—does this make her a “Rich Girl” per Hall and Oates? Or, an “Uptown Girl” who’s got a choice, as suggested by Billy Joel?
Credit cards even get a lyrical nod. Power-pop band Fountains of Wayne sings about a recently released ex-con seeking remuneration from a borrower lacking ready cash, who replies, “Hate to keep you waiting I know times are hard/now would you prefer a Visa or a MasterCard?”
This week, get charged up on credit card trends.
‘We’ve created us a credit card mess.’–Shania Twain
Statistical sources provide facts to assess the credit card landscape.
“Total U.S. outstanding revolving debt, which is chiefly made up of credit card balances, was $880.5 billion as of July 2014,” reports creditcards.com. Although many variables exist in determining card debt loads, creditcards.com has come up “with multiple credible numbers.”
Regarding card ownership, creditcards.com reveals “the average consumer is choosing to own fewer of them,” but “they’re still found in most Americans’ wallets.”
Those owning cards hold on average 3.7 cards. Twenty-nine percent of consumers don’t have a card—and 7% have at least seven cards.
Interesting comparisons in payment systems: In 2012, the average card transaction was $94, debit card transaction $39, and the “average value of a check paid” was $1,420.
Credit card purchases comprised 21% of all noncash transactions in 2012; debit cards 38%, and checks 15%.
It is expected that by 2018, there will be 180 million cardholders, and 1,185 million cards, according to the Federal Reserve Bank of Philadelphia.
‘Don’t need no credit card to ride this train.’—Huey Lewis and the News
Financial institutions invite consumers with their credit card outreach efforts. “Financial marketers are less interested in pursuing business lending and business banking… Auto loans and credit cards are receiving significantly more attention,” according to The Financial Brand.
Credit cards rank fourth on the list of products to be marketed, with 52.3% of respondents indicating cards were a focus, up 8.8% from 2014’s 43.5%.
Among the invitations for consumers are balance transfer promotions. The average transaction fee for a 0% balance transfer offer is about 3%, says CreditCards.com’s 2015 Balance Transfer Survey.
Some key findings of this report:
“Rich Americans Prefer Cash-Back Credit Card Rewards,” notes PR Newswire reporting on another CreditCards.com survey. In all, 60% of affluent Americans prefer cash back as a card benefit, and 22% like frequent flier miles.
Regardless of their wealth, “credit cardholders must follow some basic rules to get the most out of their cash back card,” notes a spokesman. Balances need to be paid in full, and users need to be attentive to fees.
‘She’ll cut up your heart like an old credit card.’—George Strait
Industry experts weigh in with card trends to watch in 2015.
“The credit card sector is a large, growing, and profitable segment of financial services, but it must soon address four emerging challenges,” says consulting firm strategy&. Possible threats:
1. Branding issues arise when consumers store card data at e-commerce sites. They do not recall which card they use, “diluting the free marketing and brand reinforcement that payments companies typically enjoy” as consumers use a tangible card. Card providers should consider partnering with merchants to offer rewards for card use.
2. Underwriting has evolved as traditional credit scoring models are challenged by other creditors. “Crowdfunding sites… have proven remarkably good at attracting reliable borrowers.”
3. Rewards have been revisited as big data allows retailers to tailor merchant-funded rewards incentives. Payment providers will get a boost when they “make rewards programs more relevant to individual consumers” as they provide relevant data for retailers.
4. Mobile wallets need to offer reward or “make a consumer’s life easier.” More collaborations are required “to break the competitive logjam.”
All of these issues are complicated by consumer reluctance to share credit data in light of recent security breaches at large retailers.
U.S. News & World Report makes five credit card predictions for 2015. Industry experts expect growing access to credit for subprime borrowers; an increase in balance transfer offers; more rigorous competition in rewards offerings; opportunity for consumers to see credit scores on their statements; and innovative methodologies to combat card security issues beyond chip and personal identification number.
“Economic growth and improved consumer confidence are fueling credit card industry optimism,” note marketing strategists at emiboston.com. Among the 10 card trends they suggest watching:
Don’t be a gambler when it comes to managing your card offerings and portfolio. The competitive environment requires vigilance.
Per Kenny Rogers, “You never count your money when you’re sittin’ at the table. There’ll be time enough for countin’ when the dealin’s done.”
LORA BRAY is an information research analyst for CUNA’s economics and statistics department. Follow her on Twitter via @Bray_Lora and visit the CUNA blog, “The Research Roundup: Economic Perspectives.”