How to Get in Consumers' Wallets

How the Families in the American Consumer Project Use Credit

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The tie between savings rates and credit-card usage are hard to miss. When consumers are using their credit cards more and saving less that can make life a little easier for marketers.

Credit: David Flaherty

In this month's installment of the American Consumer Project, we looked at the savings rate in the U.S. which has dropped again in the last quarter. Meanwhile, the Chicago Tribune reports on a study by First Data that credit-card purchases have been growing at a steady clip in 2011 -- including a 10.6% jump in third quarter.

Michael Lewis, senior customer research manager at Kraft Foods tracks both figures. "Manufacturers and retailers are chasing the consumer's shrinking wallet of discretionary funds, since incomes decreased while savings increased. Consumers went from spending 102% of their income in 2000 (-2.4% savings rate) to 92% of their income in 2010 (+7.6% savings rate), while household incomes have dropped $3,700 (inflation adjusted) during the same time period."

But what cards do consumers use, and why do they use them? For most of our county types, rewards seem to drive their choice in cards. The major exception with department-store cards where the loyalty to the store is critical. The intersection of credit cards and other brands is a powerful place for our consumers. By cross-referencing some of our Experian Simmons data, you start to see some places where partnerships could be valuable for brands and retailers alike. For example, in areas like Los Angeles (our example for Immigration Nation/Global Roots counties) usage of Discover Cards is below average but the intent to buy a major appliance in the next 30 days is much higher than average. A cross-promotion between Discover and a Best Buy/Home Depot could work well for both sides in markets like this.

We talked to our families about what it would take to get them to switch cards or get an additional one. Here's what they said.

Chris, a white, 49-year-old divorced dad in Clark County, NV, with custody of his 12-year-old on weekends.

How to get in Chris' wallet: Rewards. He uses his cash back and airline cards for almost all of his purchases, and pays them in full each month. Then he racks up the points and cash. If you want your plastic in his pocket, "blow [his] socks off with an unbeatable Rewards program."

Basha, a white 74-year-old married empty nester in Lake County, FL.

How to get in Basha's wallet: She uses her branded cards like her Belk department store, Kohl's, and Wal-Mart Discover cards at their respective outlets. But she paid off and stopped using her JC Penney card because she hasn't shopped there in a while, despite the fact that they carry her favorite clothing brand, Alfred Dunner. If JC Penney wants back in rotation it needs to get her back in the store.

Dale, a 45-year-old married farmer in Teton County, MT.

How to get in Dale's wallet: Dale's wife, Frankie, works as a dental hygienist but as a farmer Dale essentially gets one paycheck a year. They're not big on credit cards preferring to pay by debit card, cash and checks and use their tabs at many local businesses. They do have a Discover card for their daughters at college to use for groceries. Frankie says that the only thing that would make her get a new card is if someone stole her current one, but that might not be the best plan for marketers.

Liz, a white 26-year-old single renter in Champaign County, IL.

How to get in Liz's wallet: Liz doesn't feel very financially secure, nor does she think she has her balances under control. She has four or five airline, department store and cash-back cards on which she's paying the minimum each month. But she has refinanced, so while balance-transfer offers used to resonate, now she's looking at the rewards. She'll use cash-back or gift-card rewards for gifts. Her latest card gave her $200 cash back if she spent $500 in the first three months.