Credit Card Statistics That Will Shock You: Data 411
Choosing the right credit card is like choosing the right automobile, or your favorite restaurant. It won’t be the same for everybody, and what’s important to you often changes over time as well. Sometimes your circumstances evolve; sometimes your goals aren’t the same as they were before. Maybe you’d simply like to have several different options. That way you can choose each time based on the needs of the moment. Credit card statistics can come in handy to help you choose.
This is the 21st century, and finding the right website to compare credit cards isn’t that difficult. It’s knowing what you want and need from a card that can make things tricky. Let’s walk through some credit card statistics and some of the most common options presented on any credit card comparison chart and see if we can help make your choices a bit more clear.
It’s not about me deciding what’s best for you. Anyone claiming they can do that is either delusional or up to something. Instead, it’s about making informed choices about credit cards or any other form of loan or debt you choose to utilize. It’s about using credit card statistics to better decide what will help you move closer to both your short-term and long-term financial goals.
What’s Your Credit Score?
One of the biggest factors in considering what sort of credit card makes the most sense for you – and possibly which options are even available to you – is your credit score.
Most of us have a vague idea what a credit score is. But too many Americans aren’t clear on where it comes from or whether or not we have any control over it. Your credit score is a 3-digit number which acts as a “snapshot” of your overall credit worthiness. Unlike your full credit report, a credit score doesn’t tell lenders who you’ve owed or why your score is what it is. On the one hand, it’s a very limited picture of you as a borrower. On the other, it doesn’t require extensive research or consideration and offers a simplified way for lenders to quickly gage whether or not someone is a good risk.
— Loanry.com | Loan Shop 🏪 (@LoanryStore) July 11, 2019
The most common credit score scales utilize a range of 300 – 850, with higher numbers reflecting a stronger credit history. Many credit card companies use this as a primary determinant of what sort of card you qualify for – the interest rate, the credit limit, and possible additional benefits and rewards.
What Is a FICO Score and How Does It Impact My Credit Card Options?
The original three-digit “credit rating” is the FICO score, named for the company which created the system. Here are the general categories indicated by your FICO score and likely impact on your search for the right credit card.
You can learn more about what goes into computing your FICO score in this piece from CNBC. It has graphs and everything.
What Is a VantageScore and How Does It Impact My Credit Card Options?
A very similar credit score system also commonly referenced by lenders is your VantageScore. This system was developed by the three major credit reporting bureaus – Experian, Equifax, and Transunion. It’s computed slightly differently than your FICO score. But the basic idea and outcomes are close enough that we don’t always bother distinguishing between the two. If you’re weighing your options using a credit card comparison chart or other website to compare credit cards, however, it may be helpful to notice which scale is being used so you can better identify your credit card options and better understand which credit card statistics best apply to you.
Credit Scores and Your Credit Card Choices
There are a few things these numbers tell us, and a few related credit card statistics worth noting along with them.
First, according to the most recent FICO figures (above), 67% – over two-thirds – of Americans have a “Good” credit rating or higher. If you prefer to use the VantageScore model, 61% have a “Good” rating or higher, which is still an impressive majority.
Second, Americans as a whole are trying to pay down their card balances. The first quarter of 2019 saw a $22 billion decline in credit card balances after a lengthy period of gradual increases. Balances are still pretty high, however, depending on whose credit card statistics you consult. Experian, one of the three major credit reporting agencies, figures an average credit card debt of $1,760 per person (counting only adults with a credit history). The Federal Reserve of New York computes an average balance of just over $1,900 for every American with a store-brand credit card of some sort.
Third, not everyone is succeeding at paying down their credit cards. Other methods of computing outstanding credit card debt show much higher average balances – over $5,000 average credit card debt per cardholder, by some reckonings. This strongly suggests that while some Americans are paying their cards down or off, for every two or three who do, someone else’s balances are spiraling out of control. Eliminate Americans with little or no balance from the mix, and suddenly our credit card statistics change dramatically.
There’s an old joke about three guys sitting in a bar. Suddenly, Bill Gates (or Warren Buffet, or any other figure famous for being wealthy) walks in. They begin thanking him profusely and offering to buy him drinks. When he asks why, they explain that before he came in, their average income was around $52,000 a year. Now that he’s there, the average income in the room is closer to $25 billion, so of course they can afford to get the first few rounds.
That’s why average credit card debt can seem so low if measured across every adult, or even every adult with a card. It’s much higher if we consider only adults with a balance. Credit cards are tricky – those who use them responsibly can derive great benefits from the flexibility they offer, while those who don’t quickly find themselves in trouble. You should make every effort to understand the pros and cons of credit cards before signing up! In this case, looking at credit cards statistics can tell you a lot.
Fourth, at the same time, the average credit limit on our collective cards continues to rise. (There is a rise of average credit score, topping 700 in the past year, which I suppose could be related.) It remains to be seen how this plays out, but credit card statistics offer at least some positive news in the face of largely troubling figures for student loans, auto loans, and other forms of debt.
I say some positive news because not all of the latest credit card statistics are positive. That brings us to…
Fifth, Americans who are behind are getting further behind. The rate at which 30 – 60 day delinquencies became 90+ day delinquencies has been steadily creeping up since 2017. Obviously, this is the sort of thing which severely damages your credit rating. It also impacts future efforts to secure an auto loan, a mortgage, or any other sort of personal loan. While you don’t want to only make minimum monthly payments when it comes to your credit cards, you should prioritize at least making those minimum payments to avoid making things even harder for yourself down the road.
— Loanry.com | Loan Shop 🏪 (@LoanryStore) July 15, 2019
Since we’re on the subject, here are a few other common credit card mistakes you should avoid. I want you on the right side of those credit card statistics!
How Can I Improve My Credit Score (and make it easier to get a good credit card)?
First, pay your bills on time.
I know this seems flippant, and it’s not always easy. If you don’t have the money, you don’t have the money, right? If that’s the primary reason you’re late on your credit card payments and other monthly obligations, you should seriously consider revisiting your household budget. It’s possible a bill consolidation loan or other restructuring of your debt might help you “reboot” a little. You might even find part of the solution in refinancing your home.
But severe financial difficulties aren’t always why we damage our own credit. How often are we late on payments because we don’t maintain a clear budget? Or we just lose track of things? We’re busy, and doing the bills, like balancing the checkbook, feels depressing. I get it, but it’s time to adult, my friend! Timely payments aren’t just the right thing to do – over time they establish a credit history which gives you more choices and access to funds in the future. You may never plan on borrowing beyond your house or car payment, but life is full of surprises. Wouldn’t it be nice to have some options if things don’t always go as planned?
Maybe you figure it doesn’t matter at this point because your credit history is too messed up. Maybe it is. And maybe it doesn’t matter right now. But in six months you could have a better track record than you have right now. In two years it could have already demonstrated an amazing turn-around. The key to getting somewhere is to choose the right direction and start.
How about today?
Second, don’t take out loans or cards you don’t need.
Please understand, there’s no need to be afraid to shop for the right loans or right cards. Sometimes a bill consolidation loan or a new credit card with a better interest rate can be game-changers! But make those choices because they’re the right choices for you. Don’t try to game the system based on some “quick-fix” plan you read about online.
Third, avoid maxing out your cards if you can.
Use them if you need to, but it’s better to have “available credit” in the mix. That said, if you have the self-discipline to avoid unnecessary debt, don’t close or destroy cards you’ve paid off. Put them in your safe or keep them somewhere inconvenient (but secure), but they can remain open.
From a “credit history” standpoint, the ideal is to use your available credit reasonably here and there, then pay it off consistently, even if not immediately each month.
Fourth, always be on the lookout for a chance to consolidate.
It can be a game-changer to eliminate multiple monthly payments with one lower-interest card or a small personal loan. You don’t want to get into the habit of regularly juggling debt from one source to another, but as you make your payments and improve your credit rating, your options improve. Within a year or two, you may qualify for a lower-interest card or a small personal loan from your local bank or credit union or a legitimate online lender. It’s the same idea as refinancing your home at a lower rate; it’s just that the amount is (hopefully) smaller and the process far less tedious.
Finally, check your credit reports and address any disparities or incorrect information.
It’s not always easy to make this happen quickly, so don’t wait until you’re buying a house or trying to start a business. Better to handle that as soon as possible. Check your credit – like, NOW!
Small Business Credit Card Statistics
Of course, individuals aren’t the only ones using credit cards for financial flexibility. Credit cards are one of the many methods used by small businesses to purchase essential inventory, keep miscellaneous expenses organized, or otherwise grow their operation. Sometimes they’re the primary means by which a new business establishes a good credit history.
Although small businesses only account for about 4% of total credit card use in the United States, that’s still around 14 million cards. Not surprisingly, small businesses tend to have higher credit limits and spend more with their plastic revolving funds. Over 15% of total dollars purchased with cards is by small business. That’s not counting, of course, dollars spent on personal credit cards as part of individual efforts to open or build small businesses.
They’re not always the best form of small business loan, but credit card statistics say they are used effectively and often in the small business world. It’s worth keeping in mind that not every small business is a repair shop or diner these days. People are running bed-and-breakfasts, driving strangers around town, freelancing their writing or graphic design, and selling stuff online. The right credit card makes each of these easier, and sometimes safer or more productive.
Still, if you’re an entrepreneur looking to start or expand your small business, explore your loan options before simply whipping out the plastic – no matter how much credit you may have. Credit cards provide a wide range of conveniences for small business owners just like they do individuals, but that doesn’t mean they’re always the ideal solution if your primary need is substantia financing or a long-term business loan. They can charge higher fees and don’t always offer terms as favorable as personal credit cards, which throws a wrinkle into the pros and cons of our overall credit card statistics.
I’m not saying don’t do it; I’m just saying make sure it’s an informed decision.
— Loanry.com | Loan Shop 🏪 (@LoanryStore) July 5, 2019
So What Credit Card Should I Get?
I wish I could tell you. I mean, I wish I knew – and I’d tell you if I knew. But the right answer for me may not be the right answer for you, and the right answer for you may not be the right answer for the next guy. Sorry about that! The best thing you can do is compare credit cards and several aspects of them so you can make the best decision.
So here are some things to consider as you look…
Maybe all you need is a credit card.
What I mean is, maybe all that matters for you is the primary function of the card. Can you buy stuff with it, then pay it off over time? Is the interest rate reasonable? Are there any hidden fees or scary wrinkles of which you should be aware?
For me, personally, all I’m looking for in a credit card is a decent interest rate, low fees, and straightforward terms. It’s a bonus if I can get it with a Dallas Stars logo or Beatles album artwork, but not essential. I don’t care about travel points or rewards or getting concert tickets ahead of the general public or whatever. When I use my cell phone, it is primarily to call people or occasionally text. I use my laptop primarily to type documents and check email. And I use my credit card to buy stuff and pay it back over the next several months.
Do you want to pay an annual fee?
It sounds like a silly question, doesn’t it? Given the option, most of us would probably say no thanks – I’ll pass on the yearly fee if given a choice. As you’d probably guess, I won’t use a card with an annual fee. Period.
So why do others choose that option?
Because cards with annual fees offer to offset that cost with their various rewards programs. You earn travel benefits or cash back or whatever else. If the annual fee is $99, but you save $3,000 in hotel discounts and rental car specials by using the card for everything, that might be a pretty good system for you.
But be honest with yourself. Avoid aspirational card-shopping. In the same way, it’s usually a mistake to buy clothes in the size you wish you were instead of the size you are, it’s usually a mistake to sign up for a card designed for the lifestyle you wish you had instead of the life you actually live.
What kinds of rewards matter to you?
If you opt for a rewards card, what’s realistic for you? It’s hard to go wrong with cash-back, as long as you use the card for purchases you were going to make either way and you pay off the balance in a reasonable time. (Don’t play the game with yourself where you buy more than you can afford but justify it because you’re earning 5% back. You’ll lose more than that in interest in a few months. Not to mention the late fees you may be setting yourself up for by going into the deep end too quickly.)
If you think a rewards card might be right for you, read the small print. I know, I know… But seriously, that’s the only way you’re going to know if the specifics really make sense for your circumstances and preferences. I realize the TV ads and mailers make it sound so obvious. Who wouldn’t want 5% cash back on every grocery store purchase?! But if it were really such a no-brainer, why do they have to spend money advertising what a great deal it is?
And no, I’m not saying it’s a bad deal. I’m saying, read the specifics. Ask questions. Keep in mind that while there are plenty of situations in which you can come out ahead AND the lender makes a reasonable profit, other rewards programs are like mail-in rebates: they’ll honor them, sure… But while they’re hoping it motivates you to buy the product, they’re also hoping you don’t actually mail in the rebate.
Of course we’re happy to help you choose the right credit card for you, but not by telling you what to do. We’ll get a little information and help you narrow down your options. We’re all about breaking down credit card statistics and reminding you of things to consider; you want magical answers, try a fortune cookie.
(Great. Now I’m craving sesame chicken while I type. Should have chosen another way to make that point, I guess…)
What cards are other people happy with?
That one’s a little easier, although it still won’t give you that magical answer you’re looking for.
J.D. Power did a study about customer satisfaction with a variety of credit cards, both in terms of features and specific brands. Here were a few highlights:
- The number one reason (47%) customers switched cards during the 12 months analyzed for the study was for a better or different reward program.
- Now that more card users are paying attention to rewards programs, card-issuing banks are sometimes dialing back the programs. This isn’t always to reduce benefit to users; sometimes it’s because users are only using certain benefits, so issuing banks focus on those.
- Customers who actually understand the rewards program indicate greater satisfaction with their cards than customers who don’t. And over a third of them don’t. This is a problem for reward card-issuing companies for at least two reasons. First, confused and unhappy customers are more likely to switch cards. Second, happy customers who understand the rewards programs spend an average of over $300 a month more with the card.
- One of the favorite perks customers report about their credit card use is getting free credit score reports. Discover, in particular, has done an impressive job promoting this feature. You’ve no doubt seen the commercials with two people on the phone with one another, not quite twins but clearly letting us know that “they’re just like me.” (Since the free credit score perk is such a winner, it’s probably no surprise that the J.D. Power study found Discover to have the highest customer satisfaction for the time period they studied.)
- Older customers are being won over to paperless (“digital”) billing. It’s not surprising that younger consumers embrace this form of monthly accounting. But customers over 40 are not only switching to this option more and more, but it seems to increase their satisfaction with the card itself. Go figure.
Credit Card Statistics: How Are Americans Using Their Cards?
Finally, let’s look at how people are actually using that little plastic rectangle (with gently rounded edges) in their wallets or purses. Experian did a survey recently which gave us some interesting results. Keep in mind these are self-reported, and respondents could choose more than one category (so the totals are higher than 100%).
- 68% (over two-thirds) reported they used their cards to buy the everyday stuff they needed. This suggests they could have purchased the same items with other forms of payment. But that plastic offers enough convenience to make it a regular choice. While the survey doesn’t establish this, it’s likely that many of these are the same folks who pay most or all of their balance every month.
- 42% (just over 2 in 5) reported they use their cards specifically because of the rewards program associated with them. Note that this doesn’t necessarily mean that’s a good idea or a bad idea. Just that it’s an effective idea from a credit card marketing standpoint.
- 37% (over one-third) use their card as an emergency cushion. This could include unexpected medical bills, car or home repair, or any other unanticipated expense. While no one likes unexpected problems, they’re one of the biggest reasons to have a credit card or two (with funds available) – just in case.
- 32% (almost one-third) report they’re using their card(s) to improve their credit rating. Secured cards (“pre-paid” cards) are particularly effective for this if you have bad credit. But any credit card can help you build or rebuild credit simply through responsible use. Just making your minimum payment each month quickly establishes you as a better credit risk than you were a few months or a few years ago. Of course, not making that minimum payment each month does the opposite, so be realistic.
- 31% (just under one-third) say they use the card for extra things they want. This isn’t inherently bad, but I confess it makes me a little nervous. I suppose it sounds awfully close to “impulse buying” or otherwise living slightly beyond our means. Perhaps I’m reading my own poor past choices into the response. But I’d be careful about thinking of credit cards in this way on a regular basis.
- 16% told Experian they used their cards to pay off other debt. As we’ve discussed before, this can be a great strategy, but make sure you understand the pros and cons of personal loans vs. credit cards.
Hopefully, it’s helpful to know a few general credit card statistics. It can be enlightening to see how our choices and experiences compare to others. But in the end, the “best” card or the “right” card is the card that’s “best” or “right” for you.
Check out options through your local bank or other financial institution. Read through the terms of those rewards or that introductory interest rate. But before you make a decision, let us connect you with a few other options as well. It’s the 21st century – you shouldn’t be begging for credit; lenders should be working for your business. Then, you decide what you want to do. If you have questions before you even go that far, let us know. We’re always here to help.
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Blaine Koehn is a former small business manager, long-time educator, and seasoned consultant. He’s worked in both the public and private sectors while riding the ups-and-downs of self-employment and independent contracting for nearly two decades. His self-published resources have been utilized by thousands of educators as he’s shared his experiences and ideas in workshops across the Midwest. Blaine writes about money management and decision-making for those new to the world of finance or anyone simply sorting through their fiscal options in complicated times.