Citing convenience and low interest rates, many credit cardholders prefer to leave a balance on one or more credit cards and accept revolving as a way of life, and this is helping issuers to generate more interest income, new research suggests.
New York-based Auriemma Consulting Group conducted the research through an online survey of 508 U.S. credit cardholders in March.
About 55% of respondents said they are revolvers and prefer to pay credit card balances off over a specific time period. Of those individuals, 49% said they carry a balance on only one card, while 31% said they carry a balance on two cards. Only about 20% of respondents said they carry a balance on three or more cards, according to Auriemma.
Many revolvers have a tendency to regard their credit cards as a way of “obtaining unsecured loans they can keep for several years,” Bob Taglin, editor of Auriemma’s Cardbeat report, tells PaymentsSource. “If they pay off their cards, cardholders may then be inclined to find another card with a balance and repeat the same behavior for many years, which can be profitable for issuers,” he adds.
Moreover, issuers also may benefit from revolvers because they can “capture the cardholders’ loyalty, as retaining customers is certainly an issuer’s goal,” Taglin says.
Many cardholders who carry balances have done so for years and likely will continue the behavior because it has become a way of life, Taglin notes. These cardholders have chosen “a cycle of borrowing, repaying and borrowing again to support their financial needs,” he says.
The most-popular reasons for keeping a balance on a credit card include convenience and a low interest rate. About 32% of revolvers said it is easier to leave the balance on the card, while 30% cited a low annual percentage rate as the reason to keep the balance.
While 35% of respondents who were revolvers had paid off a balance in less than a year, 49% of revolvers said they had never paid off a balance or had paid one off between one and four years.
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