Out of all the products that a financial institution offers, credit cards are the most unique and challenging to design because they have dual functionality. For some, credit cards are a way to borrow. For others, they’re a way to make payments.

As we look at trends in consumer credit card usage and data from the Raddon Performance Analytics program, we find commonalities among financial institutions with the highest credit card household penetration and balance growth. What are these institutions doing that makes them top credit card performers?

Differences Among the Generations

Eight in 10 consumers in the U.S. currently have credit cards. The Raddon Research Insights study, How Consumers Use Credit Cards and Delivery Channels: ​A New Perspective, shows that consumers use cards differently depending on age and income level.  Overall, almost half of consumers spend $5,000 or more on their credit cards per year, with baby boomers and traditionalists more likely to fall into that category.

The chart below from the same study shows that younger generations are more likely than older generations to carry a balance over month to month and use their cards as a loan. The older generations are still spending, but they tend to pay off these balances each month, using the card more as a means of payment.

Based on balance and purchase behavior, Raddon created four credit card activity segments. Younger consumers tend to fall more in the Balance Rollers and Heavy Users segments, whereas the older segments fall more into the Convenience Users and Low-Moderate Users categories.

Promotion, Choice and Technology

For financial institutions participating in the Raddon Performance Analytics program, we see a few common themes among the top performers in terms of cards. On average, institutions saw a 5.7 percent decrease in their credit card portfolios as consumers continue to pay down debts with money saved throughout the pandemic and with extra funds from stimulus payments. These institutions all saw an average annual growth in balances of 30 percent and an increase of overall penetration of 20 percent. Balances for millennial households grew on average 148 percent! Let’s look at what these institutions have in common.

1. They all have introductory promotional offers.  The most common offers were low introductory rate on balance transfers and purchases, this midsize institution in the Midwest offered a reward point bonus after a specific spend amount. This is a great strategy to increase habitual usage by accountholders and get the card top of wallet.

2.  They offer choices. All of these institutions have cards that might appeal to different consumers based on their balance and usage activity.  This midsized financial institution in the eastern U.S. region offers two choices:  one for those looking for a rewards card and one for those concerned about a low rate.   They also offer assistance to accountholders to choose the best card for their lifestyle.

3. They heavily promoted the technology of the cards, whether it’s loading the card into your mobile payment app or using the contact-free capabilities of the card.  This midsize institution captured how to use the contact-free payment capabilities in a simple picture that is easy for accountholders to understand.

While there are other factors at play such as branding, marketing channels, market conditions and more, these institutions are not doing anything that extraordinary. Seemingly inconsequential steps can make a big difference. For example, I spoke with one institution with under $200 million in assets that has an accountholder base made up of a very low-income demographic. The institution has an ongoing initiative to encourage accountholders to connect their debit and credit cards to their mobile devices, and it is the first thing an accountholder sees when opening the mobile app and website.  It is the institution’s goal to have the digital wallet set up for every new customer before they leave, card in hand.

Take the Right Steps

In order to determine if you need a renewed focus on your credit card offerings, answer these questions first.

What is your current credit card penetration to your accountholder base? The average number is 23 percent. If you are below this number, focus on cross-selling cards into your current accountholder base. If you are well above average, focus on acquisition strategies to non-accountholders and promote usage to current cardholders.

What type of accountholders make up your base? Align your card offerings to meet their needs. Do you have a younger base of mostly Balance Rollers? These cardholders will be focused more on low rates and balance transfer offers than they will rewards. An older, higher-earning base will be focused more on rewards.

Do you offer accountholders an introductory offer? Consider adding a competitive introductory offer for both cross-selling and acquisition strategies.

Is your card easy to apply for and use? Take the steps necessary to ensure your card is simple to use and, most importantly, your rewards are easy to access. In 2019, the Raddon Research Insights study on cards told us 56 percent of cardholders with a primary credit card selected that card because it was easy to redeem rewards, while only 18 percent selected it for the actual rewards themselves. Ease of redemption trumps everything else.