Early reports suggest the 2017 holiday season was a good one for retailers. Consumers were in the mood to spend, and as such, Americans’ total credit card debt continued to climb.
Americans planned to spend $862 on gifts for the season, a huge jump from the $752 they planned on spending in 2016. And the numbers were significantly higher than their estimate in any November since 2007 — just before the 2007-2009 recession. 29% of Americans said they planned to spend more than $1,000.
What does this mean for card portfolios? Well, business is booming, but they should also prepare for the time of year when consumers are most apt to seek out debt consolidation and transfer options.
A recent NerdWallet analysis revealed the average household that’s carrying credit card debt has a balance of roughly $15,654. Dig deeper into retail card specifically and reports indicate Americans are carrying $1,841 in retail debt.
“There is seasonality to consumer credit card behavior,” said Denise McKendall, a credit card and trended data specialist for Experian. “As we roll into the late winter months and early spring, consumers often seek ways to transfer card debt to lower interest rate options, consolidate debt from multiple cards and perhaps even pull out personal loans. This makes it an ideal time for card portfolio managers to leverage data to anticipate consumer behaviors and be able to offer the best rates and options to retain cardholders and grow.”
Card portfolio managers should consider these questions:
- What is my portfolio risk? Did some of my consumers overextend themselves? Do I have collections triggers on my accounts to mitigate risk and manage delinquencies?
- Which consumers in my portfolio will be looking to consolidate debt? Should I reassess credit line limits?
- Which of my consumers show a high propensity to make a balance transfer?
- Do I have opportunities to grow my portfolio by offering attractive rates to new customers?
- Which customers will leave after low introductory rates expire?
- Can I use this time of year to become the first credit card consumers’ consistently use, rather than the second or third card they pull from wallet?
At first glance, it might appear challenging to answer many of these questions, but with the right data and analytics, a card manager can easily establish a game plan to conquest new business, mitigate risk and retain existing, high-value consumers.
The robust holiday season was a boom for the economy. Now card companies need to ready themselves for the aftermath.