Opportunities to Re-Engage Dormant Cardholders are Being Missed Says Auriemma Consulting Group

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NEW YORK, May 10, 2013 (GLOBE NEWSWIRE) -- According to new research from Cardbeat®, a syndicated research report published by the Auriemma Consulting Group, Inc. (ACG), the speed at which accounts become dormant happens quickly. For example, among individuals who hold dormant cards, half (50%) of those who earn at least $75,000 annually stopped using the card less than a year ago, significantly higher than the 39% of lower-income earners who said the same.

This report also shows that the top reason most consumers cancel credit cards is a lack of usage. Indeed, about half (52%) of respondents who gradually reduced their use of their card did so by reducing their number of monthly transactions. In other words, it may not be driven by dollar volume, but number of transactions and/or reduced frequency of use.

Just who stops using credit cards or closes them?

Cardbeat research shows that among the various demographic and card-usage segments examined, Millennials (defined as people ages 18 to 34) are the group most likely to stop using a credit card they consider to be their primary card (40% compared to 22% overall). Also, more affluent consumers (people with investible assets of $100,000 or more, but excluding the value of any real estate or retirement plans) are more than twice as likely to have cancelled a credit card within the last year than are their less affluent counterparts (16% vs. 7%).

The ability to identify account holders who have stopped using their cards and reactivate them before closing is very powerful. Additional rewards would most likely encourage respondents to use their dormant cards (cited by 46% of all respondents), largely driven by higher-income earners, but is much less enticing to people who earn less than $75,000 annually (57% vs. 38%, respectively). Consumers tell us that temporary accelerated earn rates may not be sufficient to make card usage stick. Those who originally acquired a card for a low APR won't find this appealing.

Matt Simester, of the Payments Insights practice at ACG, sees tremendous need for issuers to address the challenge of dormancy and attrition, even more so in an era of rising costs of acquisition and when issuers are fiercely competing for the same types of consumers. A different view needs to be adopted. For example, research shows that Millennial consumers are significantly more likely to close credit cards because credit lines are too small, which makes offers from competitors appear significantly more attractive. While the CARD Act largely ended routine credit line increase programs, the law does not explicitly prohibit such programs. Mr. Simester says that better equipped card issuers have been able to resume credit line increases while remaining compliant with CARD Act provisions. Furthermore, he says that being able to profile cardholders on different criteria other than risk or age of card tenure, will drive more appropriate targeting to reactivate dormant accounts.

About Auriemma Consulting Group

Since 1984, ACG has offered comprehensive management consulting, research, industry roundtable and benchmarking services to the financial services industry. ACG clients include credit card issuers and networks, commercial banks, mortgage lenders, merchants, and industry vendors. With offices in New York and London, ACG offers actionable solutions to help clients make important business decisions to maximise their efficiencies and revenues.

CONTACT: Matt Simester matt.simester@acg.net 212-323-7000

Source:Auriemma Consulting Group, Inc.