#Credit Card Offerings Should Consider Cardholder Segment

The credit card landscape is becoming more competitive as the economy experiences an uptick and consumer confidence reaches pre-recession levels. Community FI issuers do not have to compete on every aspect of a credit card product. However, their cards teams should design compelling products that take into account the features, terms and conditions offered by those issuers going after the same consumer segment(s).

Consumers are increasingly aware of the variety of credit card offerings in the marketplace today. As consumers evaluate the plastic they carry, there are a number of factors they deem important. These factors include fees, card security and card benefits and value-added options, such as rewards and loyalty programs.

To remain relevant, card issuers should offer consumers card conveniences and benefits that best meet their needs. This requires card issuers to understand each of the main cardholder segments they serve.

Cardholders are often divided into the following segments:

Revolvers — Cardholders who carry balances, paying off those balances over time

Transactors — Cardholders who pay their balances each month, avoiding interest charges

Inactives — Cardholders who are not currently utilizing their cards

Paydowns — Cardholders who are paying down their balances and not utilizing their cards for new purchases or balance consolidations

Financial institutions (FIs) looking to optimize their card portfolios can start by creating targeted strategies for each cardholder segment. To attract both revolvers and transactors, consider offering both a low-rate product and a rewards product. If your consumer base warrants it, consider a premium product and/or a business card. Both can be very profitable, given the right commitment to marketing and analytics.

Additionally, FIs can target individual consumer segments with features and benefits like:

Multi-product benefits — Cards should be compelling and take into account the features, terms and conditions offered by issuers pursing the same segment of consumers.

Minimal fees — Consider offering incentives such as no foreign transaction fees.

Bureau score and education — Give cardholders free access to their credit profiles and credit scores, along with related information about their credit.

Cell phone protection — Consider offering cell phone damage or theft protection when cardholders use their credit cards to pay cell phone bills.

Price protection — This feature refunds the difference when a cardholder purchases an item, then finds the same item at a lower price (within a certain time frame).

Local merchant discount program — Consider offering automatic discounts when cardholders use their cards at participating local merchants.

To learn more about optimizing your credit card program to meet the needs of different consumer segments, download my white paper: “Getting the Most Out of Your Credit Card Program.