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Credit Card Enrollment Is Up, but High Attrition Means Limited Gains

February 09, 2018 / Source: Bank News

February 9 — In 2017, U.S. credit card issuers booked 66.6 million new accounts. However, due to an attrition rate of 15 percent, the total volume of accounts grew by only 2.3 million, meaning that issuers must book that same amount to maintain interest-generating portfolios.

According to new research released by Mercator Advisory Group in its Credit Card Acquisitions: Maximizing Results Amid Change report, while there have been more than 60 million new credit card accounts opened in the U.S. since 2015, total account growth has occurred much more slowly. Data shows that cardholders are leaving their issuers almost as quickly as issuers can open new accounts.

“As can be observed from many issuers’ loss numbers, accounts in the portfolios have not seasoned, so risk and delinquency are high,” said Brian Riley, director, credit advisory, at Mercator.

It also seems that cardholders may have found a loophole in the rewards models of many cards, closing one account and shifting to the next account with a better introductory rewards offer. A 2017 report, also by Mercator, indicated that return on asset (ROA) for credit cards in the U.S. fell from 7.65 percent in 2006 to a projected 3.74 percent in 2017. A driving factor behind this decline is net revenue per account, and attrition also factors in.

The full report, which can be purchased from Mercator, includes data on U.S. cardholder attrition rates, total numbers of new accounts, new account bookings by year, sources of U.S. card acquisitions and projected card acquisition volumes by channel through 2022.

Bottom line: card issuers will need to adapt to a changing market. Moreover they must keep the value proposition of their card offers attractive to retain accounts, reducing the current attrition rates.