The Many Sides of Consumer Credit Cardholders and Their Needs

Mar 19, 2018

Credit cardholders come in all shapes and sizes

It is easy sometimes to think in black and white rather than shades of gray when it comes to credit card behavior. Or perhaps in this digital world we tend to think of things as being either on or off. This binary way of thinking applies to some credit card issuers’ view of credit card behavior segments. For example, issuers often segment their card holders into either/or segments: a Transactor, Revolver or a Short-term Borrower (also known as a Rate Surfer).

Yet, in reality, a customer’s card usage and payment behavior can be as complex as humans are themselves.

Five typical behavior segments

Some of the most common payment profiles are:

  1. Transactor – a credit card user who uses their card for purchases and pays the balance in full each month.
  2. Revolver – a credit card user who may not use their card for purchases yet carries an outstanding balance that is accruing interest.
  3. Occasional Revolver – a credit card customer who occasionally does not pay their balance in full and may revolve just a few months out of a year.
  4. Short-term Borrowers (Rate Surfers) – a credit card customer who is taking advantage of low or 0% short-term loan vehicle. This group may also consist of highly-leveraged customers who are fighting against the standard high-interest rates by constantly moving their balances from card to card.
  5. Non-credit cardholder– a customer who uses cash, checks or a debit card for all of their purchases.

Yet when you take a holistic look at one individual across all of their credit cards, it becomes evident that a customer who is a Transactor on one card may be a Revolver or a Short-term Borrower on another. Customers have practiced compartmentalized spend for some time – in fact, it can be argued that the industry encouraged this behavior pre-CARD Act 2009[1] through payment allocation methodologies that were disadvantageous to cardholders.

Based on the recent Gallup poll, the average number of cards that a credit cardholder owns is 3.4[2]. Yet, as you can see form the chart below, consumers own anywhere from zero up to 23 cards – quite a spread. One has to wonder what an individual is doing with 23 credit cards, besides chasing teaser rates.

Source: Gallup Poll 2016

Across the card industry, 45% – 48%[3] of credit card accounts comprise revolving balances.

Why consumers own multiple card types

Rewards are a big motivator for customers to hold multiple cards. As you can see from the following chart[4], the types of rewards on most used cards sums to well over 100%, which means that cardholders often hold multiple types of reward cards. Cash back cards appear to be the most prevalent (61.3%); yet if you sum all of the other “non-cashback reward” cards (e.g., airline, hotel, retail and entertainment rewards), merchant-specific reward cards are even greater (71.1%)

Source: Statista: WorldPay Survey Sept 2017

Customers weigh the benefits of retailer reward cards versus general purpose reward cards

A love of rewards plus loyalty to a favorite retailer can be a motivation for a consumer to hold multiple store reward cards, both credit (private label and general purpose co-brands) and a few select co-branded debit rewards cards. A consumer may hold numerous merchant payment cards to earn the high rewards for shopping at the specific merchant and then not use the card for any other purpose – think clothing retailers, gas cards, department stores, entertainment or convenience stores.

Issuers recognize that customers use different cards for different purposes based on what is most advantageous for the individual. The behavior you see on one card is not the full picture of that customer’s credit card behavior.

Customers compartmentalize their spending for a variety of reasons: to budget, to separate specific expense types, to finance big purchases, to optimize reward earning, or perhaps to fund their small business.

Some new FinTech companies are designing solutions to capture this occasional revolving behavior while also capturing a customer’s everyday spend.

In the case where a customer has a favorite retailer and desires the special perks (e.g., free shipping, easy checkout, early access to new season merchandise) it makes sense to take the retailer’s private label or co-branded credit card and use it in store. Or perhaps, the customer has a big appetite for retailer-specific rewards, so may be motivated to use that cobrand card for all of their everyday shopping to rack up more rewards. The strength of the consumer’s brand affinity seems to be the driving motivator for how the retailer reward card is used. Yet, more frequently, a customer’s outside spend is reserved for the more aspirational cobrand categories of airline, hotel or simple cashback. Also, there is the long list of general-purpose reward cards offered by almost every bank. The vast amount of reward card choice can become overwhelming.

Premium rewards charge and credit cards

There is a significant portion of customers who are through and through rewards junkies. Typically, these high-spending customers travel a great deal, are self-employed or are reimbursed promptly for their purchases by their employer. Therefore, the customer owns and collects points for travel with their airline, hotel or a general premium rewards card, some of which charge an annual fee.

Increasingly, premium rewards cards are utilizing a strategy of also offering a complementing revolve card “for those times that paying the purchase in full may not be possible,” or the customer is making personal purchases that won’t be reimbursed by an employer.

The variety of credit cardholders’ needs

Credit card customers need tools to assist them in managing their money, their accounts and their rewards. Regardless of the customer’s paying behavior, there is opportunity to develop financial management education series and money management tools to assist them in gaining control over their finances.

Despite these distinctions in cardholder behavior, there are unique needs of each behavior type which an issuer can address.

Revolvers’ and Short-term Borrower’s needs

Since revolvers and short-term borrowers are typically not purchasing, rewards tied to spend on new transactions are not a viable option – they become inactive rewards members because they can’t earn points on fees or outstanding balances. Hence, they are traditionally not reward program candidates. Instead, they are chasing teaser intro rates and parking balances with the intent to pay them off.

With that in mind, content, channel experiences and tools (CRM), which assist in helping them manage their finances and giving them better control, are what is needed. With mobile apps and digital communications, there are many opportunities to cater to the needs of these customers with financial management education, credit score management, account alerts and more.

Sample of AMEX AccountAlert Options

Some specific financial management tools include:

Alerts: Intro rate expires on x date, payment due on x date, payment received, payment NOT received, over credit limit, close to credit limit (see attached sample).

  • Messaging: Paying more than the minimum due will help you pay off your balance faster.
  • Credit score tools: Free credit score, advice on how to improve your credit score, hints as to what impacts your credit score.
  • Spending trackers and analyzers: Retail banks and card companies have developed advanced tools to assist customers in tracking and budgeting their spend, forecasting potential cash shortages based upon their spending and earning history, upcoming bill due dates, and setting specific budget controls by merchant category.

Transactors and Occasional Revolver needs

“Pay now, pay later, or split it up – this may be a reward opportunity for compartmentalized spenders.”

The fact that a Transactor is not always a Transactor presents an opportunity for an issuer to offer a unique solution. The lender can offer rewards to capture a customer’s everyday spend, yet when there is need to finance a purchase over a longer period the cardholder can elect to move that purchase to a different low-rate finance card. By integrating the experience for the two products, the lender can capture more, or even all of a customer’s, payment and borrowing behaviors.

In fact, a number of FinTech and European companies have been experimenting and developing solutions that service the customer who is seeking both rewards and low-rate financing. A common customer experience goes as follows:

  1. Customer uses card to make a purchase.
  2. Customer receives a text message providing the option to move this purchase to a low rate loan product OR keep on the existing credit card OR split the amount between the two options, for instance half on the rewards credit card half on the low rate loan.
  3. Customer replies with instructions with how to allocate purchase amount.

Understanding the larger financial picture for individual cardholders and meeting their needs across the range of payment, borrowing and rewards options is required in order to win more of each customer’s share of wallet.

Kobie offers multiple solutions to assist you in addressing the varied needs of your customers. In order to understand and address how your customer may span multiple traditional segments, Kobie provides strategic consulting and tools to assist with creating a personalized customer experience including: segmentation, analytics, communication, and engagement tools, with or without a formal rewards program structure. To learn more, contact Kobie Marketing at

[1] CARD Act 2009,
[2] Gallup Survey 2016,
[3]Gallup Survey
[4] Statista WorldPay Survey 2016;