Report Overview
What is an example of how hoteliers benefit from co-branded credit card products?
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Visibility and insights into consumer spending patterns
Packaged Facts, a leading provider of consumer-oriented market research and analysis, today announced the launch of its new report “Co-Branded Credit Cars in the US, 9th Edition,” offering a deeply detailed analysis of the industry specific dynamics affecting the performance of the largest co-branding partnership segments, consumers and the competitive and economic challenges shaping the industry.
Rebounding successfully from the COVID-19 pandemic downturns in purchase volume and revolving balances, by early 2021, the industry is fully recovered in 2023, with major firms – including Chase, Capital One, and Wells Fargo – all showing growth in their credit card outstandings between 2020 and 2022.
With the co-branded credit card market reflecting the economic health of multiple sectors – as well as the overall health – of the economy, key challenges still remain, including rising charge-off rates, rising interest rates and the impact of inflation, and aggressive regulation of late fees. In addition, co-branded credit cards are not optimizing their utility, as consumers are reluctant to use co-branded cards outside their featured brands.
In general, longer term payment trends – such as the switch from checks and cash to electronic payments – continue. Younger consumers in particular are not interested in using cash, with a third of those under 50 saying they never use cash.
In 2022, the top US co-branded credit card programs accounted for $757.9 billion in purchase volume. Costco led the pack, with retail, airline and hotel partnerships representing the rest of the leaders. In addition to Costco, leadng retailers include Walmart, Amazon, and Target. Key airline partners are American Airlines, Delta, and United, while Marriott International is a key hotel partners.
Nonetheless, many large retailers offer both private label and co-branded cards, relying on the same issuer to handle both portfolios for consistency across new account acquisition initiatives, rewards accumulation paths, and customer service standards.
Consumer demographics show that 70% of adults have credit cards with nearly 30% holding co-branded cards. The most common type of co-branded cards are those affiliated with department stores, followed by Amazon/Prime, warehouse clubs, and airline/hotel chain cards. What consumers want most of these cards – no matter where used and when – are no annual fees, 100% fraud protection, and great customer service, and 0% interest on purchases for the first 12 months.
Credit Card Industry During the Pandemic
The credit card industry successfully rebounded from the COVID-19 pandemic although aggregated issuers only exceeded key 2019 performance metrics in Q2 2021.
Households had a variety of strategies for managing budgets during the pandemic as they worried about job loss and waited for federal pandemic relief payments. Some Americans closed credit accounts, while other consumers either switched from rewards co-branded credit cards to cash-back cards or began leaning more heavily on their debit cards as they monitored and managed their household spending.
In addition to transitioning spending to debit cards, many consumers began experimenting with Buy-Now, Pay-Later (BNPL) loans which offer short-term installment loans for smaller dollar purchases.
Overall purchase volumes for the major networks were negatively hit during 2020 as the number of open credit card accounts shrank and consumer spending moved to debit cards and shorter-term installment loans. These payment changes were enmeshed in broader changes to where and how consumers spent their money.
Credit Card Industry Post-Pandemic
The credit card industry began recovering from pandemic-downturns in purchase volume and revolving balances by early 2021. In 2023, the industry is fully recovered with JPMorgan Chase, Capital One and Wells Fargo all showing over 25% growth in their credit card outstandings between 2020 and 2022.
While consumers paid off their revolving credit card balances with their federal stimulus payments in 2020 and 2021, those payments have ceased and student loan repayments have restarted and inflation remains elevated.
Consumer Credit – More Consumers Carry Unpaid Card Balances
Most US consumers (75%) own a credit card and as inflation has risen faster than real wage growth since 2021, more consumers are negotiating the loss of buying power by using their credit card lines-of-credit as household budgeting tool. An August 2023 Bankrate consumer survey found that 47% of cardholders carry over unpaid credit card balances from month-to-month (at least once a year), up from 46% in December 2022 and 39% in December 2021.
A June 2023 consumer survey by Mintel found that 32% of consumers said that inflation has increased their concern about paying off debts and that 22% of consumers surveyed said that inflation has caused them to use their credit cards more often.
In the first two quarters of 2023 outstanding consumer debt increased 4.0% which is deeply moderative of the 15.1% growth in revolving consumer credit during 2022 when the rate of inflation peaked at over 9%.