Increased financial stress and alternative financing options have contributed to a significant decline in the overall share of customer spending allotted to a primary credit card, according to a recent study from J.D. Power.
The J.D. Power 2022 U.S. Credit Card Satisfaction Study found that while satisfaction with credit card issuers has increased in the past year, more competition in the consumer lending space – including buy now, pay later plans – has affected credit card spending.
“Credit card issuers are doing a relatively good job of building strong customer relationships in a highly uncertain economic environment, but there are some very real concerns looming on the horizon,” John Cabell, director of banking and payments intelligence at J.D. Power, said in a statement. “Chief among these is the declining share of spend going to primary credit cards. Despite recent spikes in travel and spending, cardholders generally have been taking a more cautious stance with credit card spend in the past five years. They are increasingly turning to other channels such as debit cards, BNPL and even cash.”
The study was conducted from August 2021 through June 2022 and included responses from 27,819 credit card customers. It measured satisfaction with credit card issuers using six factors: benefits and services, communication, credit card terms, interaction, key moments, and rewards.
Overall satisfaction improved year-over-year by 5 points to 810 on a 1,000-point scale. Areas that saw significant improvement included benefits and services, credit card terms, and communication. Levels of trust in credit card issuers also increased compared to last year, up six points to 828.
Net promoter scores, which measure the likelihood a customer would recommend a product, rose four points to 46 on a 100-point scale.
Despite increased satisfaction, credit card customers allotted less monthly spending to their primary credit card. Customers used their primary credit card for 42 percent of spending, down from 47 percent in 2021 and 2020 and 50 percent in 2019.
Instead of using credit cards, customers making a large purchase have considered alternatives, the study found, such as buy now, pay later; flexible financing; installment loans; and personal loans. The most popular lending alternative was buy now, pay later, with 28 percent of customers considering it for a large purchase. Survey respondents said reasonable fees and competitive interest rates drove them to consider buy now, pay later.
The study also found that more customers are now considered financially unhealthy. J.D. Power classified 57 percent of credit card customers as financially unhealthy compared to 53 percent last year. More customers also considered themselves worse off financially, with 22 percent saying their financial situation had worsened over the past year compared to 18 percent in 2021. The share of credit card customers who said they were carrying revolving debt on their primary card was 49 percent, up from 43 percent in 2021.
“It is going to become critically important for card issuers to improve product value and boost proactive support for a growing segment of financially stressed customers as we move into this next phase of the economic cycle,” Cabell said.