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Majority Rules: Lower income-earners’ spending and credit profile

Lower income-earners, which make up 60% of Americans, are the vehicle driving the U.S.’s booming economy.

While the top 40% of earners usually direct U.S. consumption growth, “2016-2017 was the first two-year span in at least two decades that the bottom 60% accounted for the majority,” according to a recent study by Reuters. The trend continued in the first quarter of 2018.

As wages remain flat and borrowing costs increase, some economists worry that this majority may contribute to increased credit card delinquency should the economy become less favorable; however, statistics suggest otherwise.

According to an Experian study on lower income consumers, low income does not mean low credit scores. 67% of lower income consumers (defined as those with income totaling less than $35,000 per year) have access to credit, with 39% holding prime scores and 21% holding near prime scores.

Some analysts have brought attention to recent spikes in credit card delinquencies and charge-off rates at smaller commercial banks during the first quarter. However, when combined with the largest 100 commercial banks, the national credit card delinquency rate in Q1 was 2.48%, which is lower than 15-year averages.

Consumers with lower credit scores, including those who are also lower income, are looking to build creditworthiness, according to data collected during an Experian-sponsored credit card survey last year. This suggests there is a need for lenders who meet the needs of consumers of all kinds, spanning from first-time lenders to long-time credit-holders, regardless of income.

Successful acquisitions begin with powerful growth strategies during prospecting. By watching where the majority of spending is taking place, or rather who is conducting that spending, new opportunities are apparent. Effective prospecting tools can help you optimize your channel mix and clearly identify credit worthy consumers. These items assist in determining the right start for your acquisition process, and deliver better program results.