78 Million Americans Switched Their Main Credit Card—Banks May Pay You To Come Back

More than a third of U.S. credit cardholders say they’ve changed the card they use most in the past two years and most didn’t need to apply for a new one to do it. They pulled out a card they already had in their wallet. There’s a strong argument for customer retention bonuses. But those teach customers the way to get rewarded is to stop spending. A new PYMNTS Intelligence study, produced with Elan Credit Card, surveyed 2,460 U.S. cardholders in June. It found that 36% had changed their primary card in the previous 24 months. The report estimates that’s about 78 million people. You may still have your old card open, but spending shifts long before customers actually cancel. Most Switchers Already Had Their Next Card 58% of switchers moved an existing card to the front of their wallet. Only 42% opened a new card to make it their primary one. 71% of switchers decided within a month. And 78% considered no more than two cards. 46% reported no contact with their previous issuer before switching. Another 37% contacted the bank themselves but didn’t get an offer that retained them. Better rewards were cited by 38% of switchers, a higher credit limit by 36%, an initial bonus by 30%, and a better app by 24%. (Customers could have more than one reason.) 56% of Gen Z cardholders had switched, compared with 18% of baby boomers and seniors. I recently wrote about moving my everyday spending from Venture X to Bilt Palladium. I’m keeping Venture X for its benefits, including lounge access. Capital One still has me as a cardmember, but that’s different from getting my everyday purchases. Keeping The Account Open Isn’t The Same As Winning Back The Spending Retention offers may come when you call to cancel, often after an annual fee posts. Sometimes there’s a bonus, sometimes a statement credit, and sometimes nothing. What the bank is willing to offer may depend on your value as a customer or what it’s trying to accomplish with that particular card portfolio. If a bank gives a customer a reason to start using the card again, some may keep using it after the bonus is earned. But paying someone to postpone cancellation, make a few purchases, and put the card back in a drawer isn’t profitable. Banks already make spending offers without waiting for a cancellation call, too. In April, I covered an Amex Business Platinum offer giving an existing cardmember 200,000 bonus points after $59,000 in spending, repeatable three times. That’s up to 600,000 bonus points, separate from the points earned on the purchases themselves. The Hard Part Is Finding Offers That Work PYMNTS argues that banks are responding with fee waivers when customers really want loyalty bonuses, higher credit limits, and better rewards. Among switchers who received a retention attempt, 32% reported a fee waiver or reduction, 31% a statement credit or cash back, and 31% bonus points or miles. But these are people who switched anyway. Customers who accepted a fee waiver and stayed aren’t in that comparison. It tells us what some unsuccessful offers looked like, not which offers succeded. The report compares the offers received by 335 switchers with what all 884 switchers say would have kept them. Only 13% said nothing could have persuaded them to stay, which the report takes as evidence that most departures were preventable. Survey responses aren’t the same as actual behavior, and the question of what bonus works for retention is always at what margin. There’s always a price that will earn someone’s business, but it’s often to high to be worth it. The report’s dismissal of fee waivers is especially odd when 23% of switchers cited a new or increased fee. What This Could Mean For Card Offers You Receive I imagine we’ll see more attempts to win spending before a customer asks to close an account. That’s the direction the report recommends, and it builds on offers banks already make: Bonuses triggered by declining use. A bank sees fewer purchases and offers extra points for spending over the next few months. That could catch a customer early, though this study doesn’t show whether declining use gives enough warning before the decision has already been made. More offers designed to build a habit. Monthly spending bonuses, extra rewards in categories you use, and repeated reasons to reach for the card. The bank needs to know whether you keep doing that once the promotion ends. More attention to younger customers and the bank’s mobile app. Among Gen Z switchers, 31% cited a better app, alongside 35% citing rewards and 33% credit limits. But not as much extension of credit as the report suggests. The report urges attention to financially stretched customers. Wanting more credit doesn’t establish that extending it will be profitable. People who want more credit are often the last people you want to extend credit to, and the survey doesn’t measure credit losses. It’s often easier and cheaper to retain a customer than to acquire a new one. Many banks focus too much on acquisition, and they rarely disclose the number of cardmembers leaving a portfolio. Actually retaining a customer so that they spend should get more investment, but that can be hard to justify internally when the bank already spend money acquiring that customer in the first place – and they may not yet have earned back their acquisition cost. (HT: So Many Points) Topics on this page