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NerdWallet Credit Card Landscape Study 2011-2014

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We admit it: Nerding out about credit cards is our favorite thing to do. This time, we used information from our proprietary database of more than 1,200 cards to analyze consumer and industry credit card trends between 2011 and 2014.

Here are our key findings:

  • Consumers appear to be willing to pay more in fees for credit cards that offer higher rewards. This is based on a comparison of average card offerings from banks to the cards that consumers applied and qualified for between 2011 and 2014.
  • Consumers appear to be selecting and qualifying for credit cards that offer lengthy introductory 0% periods. This is based on a comparison of average card offerings from banks to the cards that consumers applied and qualified for between 2011 and 2014.
  • Consumers appear to prioritize saving on fees over saving on APR. This is based on a comparison of average card offerings from banks to the cards that consumers applied and qualified for between 2011 and 2014.

For this study, we pulled together data from our internal database of over 1,200 credit cards and analyzed trends on lots of different card features. To do this, we took annual averages of the card features of interest and tracked their movement over a 4-year period.

But we did more than just look at the simple average of the features in the products that credit card issuers were putting on the market. We also calculated and tracked a weighted average of the features in the products that consumers are applying and qualifying for. If a lot of consumers were selecting a particular card, its impact was greater on the weighted average than cards consumers applied for less frequently.

This approach allowed us to formulate hypotheses about consumer credit card preferences and industry trends. For more details on how we crunched the numbers, see our Methodology section below.

I. Consumers applied and qualified for cards with higher-than-average rewards

Key findings:

  • Signup bonus offers for cash-back cards weren’t as high as those for points and miles cards between 2011 and 2014.
  • Consumers consistently applied and qualified for points and miles cards with higher-than-average signup bonuses and ongoing rewards between 2011 and 2014.
  • Consumers consistently applied and qualified for points and miles cards with higher-than-average annual fees between 2011 and 2014.

In order to analyze trends in credit card rewards in a meaningful way, it’s important to categorize cards by the type of rewards currency they earn: cash back, points, and miles.

Cash back cards: Rewards

The average signup bonus amount among all cash back cards in our database was $58.66 between 2011 and 2014; this offering remained relatively flat during this period. The average signup bonus amount among the cash back cards that consumers applied and qualified for was $133.61.

The average value of ongoing rewards among all the cash back cards in our database was 0.9% between 2011 and 2014; again, this value fluctuated little over the time period we studied. The average value of ongoing rewards among the cash back cards that consumers applied and qualified for was 1.1%.

Points cards: Rewards

Points cards tell a different story. The average signup bonus amount among all points cards in our database was $245.17 between 2011 and 2014, and changed very little year over year. But the average signup bonus amount among the cards that consumers applied and qualified for was $264.88. The largest jump came between 2012-2014, when there was a 65% increase in the average signup bonus amount among points cards that consumers applied and qualified for.

In terms of ongoing rewards, the average value among all points cards in our database was 1.0% between 2011 and 2014, with very little volatility. The average among the points cards that consumers applied and qualified for was 1.6% during that same time period, with very few fluctuations.

Miles cards: Rewards

A similar trend occurred in miles cards. The average signup bonus amount among all miles cards in our database was $163.56 between 2011 and 2014, and this fluctuated very little over that time period. However, the average signup bonus amount among the miles cards that consumers applied and qualified for was $298.58 between 2011 and 2014. The sharpest increase came between 2012 and 2013, when there was a 45% increase in the signup bonus amount among miles cards that consumers applied and qualified for.

For ongoing rewards, the average value among all miles cards in our database was 1.0% between 2011 and 2014, with little fluctuation. The average among the miles cards that consumers applied and qualified for was 1.1% during that same time period, with very little volatility.

Annual fees: Cash back, points, and miles cards

Finally, we look at annual fee trends in cards that earn different rewards currencies. In cash back cards, there’s not much of interest. The average among all cards in our database was $7.37 between 2011 and 2014; the average among the cards that consumers applied and qualified for was $5.90 during that same period.

However, points and miles cards are quite different. The average annual fee among all points cards in our database was $13.39 between 2011 and 2014, but the average among the cards that consumers were applying and qualifying for was $65.83. For miles cards, the average annual fee among all cards in our database was $81.63. The average among the miles cards that consumers applied and qualified for was $90.73. There was little volatility in these averages.

We have a few hypotheses to explain why rewards and annual fee trends followed the patterns described above:

  • Consumers who prefer points and miles cards are interested in products with big signup bonuses; this hypothesis is supported by the fact that they consistently applied and qualified for cards with higher-than-average signup bonuses between 2011 and 2014.
  • Consumers understand the value of credit card rewards, and also understand that getting the best rewards means paying a higher-than-average annual fee.

Cash back card signup bonus

01

Cash back card rewards rate

02

Points card signup bonus

03

Points card rewards rate

04

Points card annual membership fee

05

 

Miles card signup bonus

010

 

Miles card ongoing rewards rate

07

Miles card annual membership fee

08

II. Consumers applied and qualified for cards with longer-than-average 0% periods

Key findings:

  • Consumers applied and qualified for cards with longer 0% periods (on both purchases and balance transfers) than averages offered industry-wide between 2011 and 2014.
  • Consumers applied and qualified for cards with lower balance transfer fees than averages offered industry-wide between 2011 and 2013.
  • Consumers began applying and qualifying for cards with higher balance transfer fees than averages offered industry-wide in 2014.

One way that credit card issuers attract new business is by offering introductory 0% APR deals on their cards. These offers usually come in two forms:

  • 0% introductory offers on purchases
  • 0% introductory offers on balance transfers

The most valuable 0% introductory APR offers are those that last the longest. Between 2011 and 2014, the average introductory 0% purchase APR offer among all cards in our database lasted 9.3 months. But the average among the cards that consumers applied and qualified for was 12.7 months during that same period.

This same trend holds true among balance transfer offers. Between 2011 and 2014 the average 0% balance transfer offer among all cards in our database lasted 9.2 months. But the average among cards that consumers applied and qualified for was 14.3 months during that same period.

Aside from the length of a 0% offer, another important consumer consideration is balance transfer fees. The average balance transfer fee carried by all credit cards in our database was 2.6% between 2011 and 2014. The average balance transfer fee carried by the cards that consumers applied and qualified for was 2.2%. 2014 saw some volatility in balance transfer fee trends, both in terms of banks’ offerings and consumers’ application and approval trends.

We have a few hypotheses to explain why introductory 0% APR and balance transfer free trends followed the patterns described above:

  • Finding cards with long 0% APR periods is important to consumers; this extrapolation is supported the fact that consumers consistently applied and qualified for cards with longer-than-average 0% periods between 2011 and 2014.
  • Qualifying for cards that offer longer-than-average 0% periods was achievable for many consumers between 2011 and 2014.

Balance transfer fees are a confusing credit card feature; although consumers have consistently applied and qualified for cards with lower-than-average balance transfer fees, this trend may not hold.

Intro APR card intro APR period

09

Balance transfer card balance transfer length

010

Balance transfer card balance transfer fee

011

 

III. Consumers applied and qualified for cards with higher-than-average APRs; the opposite is true for fees

Key findings:

  • Consumers applied and qualified for cards with higher APRs than the averages offered industry-wide between 2011 and 2014.
  • Consumers applied and qualified for cards with lower fees than the averages offered industry-wide between 2011 and 2014.

Credit card costs generally come in two forms: APR and fees. Between 2011 and 2014, consumers consistently applied and qualified for cards with higher APRs than industry-wide averages. For example, between 2011 and 2014, the average purchase APR offered among all credit cards in our database was 16.1%. But the average among the cards that consumers applied and qualified for was 17.8% in that same period.

However, the opposite is true when we look at fees. Take foreign transaction fees for example: Between 2011 and 2014, the average foreign transaction fee among all credit cards in our database was 2.1%. But the average among the cards that consumers applied and qualified for was 1.3% in that same period. The data shows that this trend – of consumers applying and qualifying for lower fees than averages offered industry-wide – holds true in nearly every fee we analyzed.

We have a few hypotheses as to why APR and fee trends followed the pattern described above:

  • Consumers are unaware of that they’re overpaying on interest, i.e., they don’t know that lower-cost options exist and therefore aren’t applying for them.
  • Consumers are unable to qualify for cards that offer the lowest APRs.
  • Consumers prioritize minimizing fees over minimizing APR.

APR rates

012

Late fees and annual membership fees

013

Balance transfer, cash advance and foreign exchange fees

014

Study Methodology:

  • We used our internal database of more than 1,200 credit cards to calculate both a simple average as well as a weighted average among various card features between 2011 and 2014.
  • To derive the simple average, we averaged the offering of a particular feature (annual fees, for example) among all cards in the database for that year. The results from this method reflect bank offerings.
  • To derive the weighted average we took into consideration what consumers are choosing to apply for and then also qualifying for, so that the more popular cards for which consumers qualified for counted for more in the average than the less popular ones.
    • We define popularity by the number of applications and approvals a particular card received.
    • The higher the number of applications and approvals for that card, the bigger the impact it had on the overall index.
  • To convert the points and miles offered by the cards in our database into a dollar value, we used a rough industry average of fair market value of the various programs. As such, we equated each mile and point to $.01.