Study Shows How Recommendations Influence Which Credit Card a Consumer Chooses

A study from PYMNTS Intelligence and Elan found that 1 in 3 consumers opened a new credit card in the last year, and 80% of them were already cardholders. General-purpose cards were the most popular, especially for financially struggling families. 

The survey examines the impact that individual financial stability has on the adoption and usage of cards, as well as the influence of social channels on the web and family and friends.

All told, 66% of new credit cardholders chose general-purpose cards, but 75% of financially struggling consumers chose this option. Recommendations were even more influential when it came time to choose a credit card: 73% of respondents said a recommendation by someone they knew dictated the decision “a great deal.” 

And indeed, even as their motivations for getting a credit card differed — rewards, building credit, emergency funds — most survey respondents said they used their new cards actively and often.

The data offers credit card companies and advertisers a blueprint on how to engage different segments of consumers. As described in the study, “Knowing why and how people will use one product rather than another, financial institutions can align and market to what cardholders are planning to do and what they are doing.”

The study provides four actionable insights for the credit card industry.

When it is time to choose a new card, about one-third of cash-strapped consumers listed building credit as a top factor. 

For those consumers, luxurious extras are a secondary consideration to such basics as low charges, broad acceptance, and credit education features. Eighty-six percent of new card users opted for general-purpose cards, which offers issuers a real opportunity.

This customer segment benefits from credit products that include options for flexible limits, timely reporting to credit bureaus, and tracking tools. These features build trust and long-term loyalty — especially among customers who are discouraged due to past disappointments.

Recommendations take precedence over advertising or even internet research. Indeed, an astonishing 36% of customers said they first learned about their latest card through a trusted source. And of these customers, almost 3 in 4 described recommendations as being very influential.

An astonishing 36% of customers first learned about their latest card through a trusted source.

This establishes a compelling argument for reward programs in which both the recipient and referrer are rewarded. Advertising these initiatives through social channels has the potential to drive reach and adoption of cards without excessive dependence on advertising efforts.

The survey found that 58% of users of new accounts are currently making full or partial use of the card. This account user rate jumps to nearly 60% among financially stable customers and customers who have already received a card.

Issuers also can stay on top by providing value in people’s everyday lives — cash back at the supermarket, on subscription services, or utility bills.

All cardholders are not equal. New customers said in the survey that they value building credit and emergency coverage most; repeat customers enjoy value travel perks and cash back. And so, the marketing has to keep pace with the customer.

New credit consumers should be most engaged through messaging that deals with financial empowerment, while seasoned users would respond more readily to offers of elite rewards, concierge privileges, and how convenient it is to combine rewards with their loyalty programs.

There is no monolithic consumer behavior when it comes to credit cards. There are social, historical, and economic determinants of what draws people to a card and how they use it. The future for issuers is personalization. When marketers meet customers where they are, they create long-term relationships.