Dissatisfaction with high annual percentage rates is the main reason consumers cancel credit cards, according to new research from Auriemma Consulting Group.
But card loyalty also plays a role, as many respondents to a recent Auriemma survey saying they rarely used the cards they canceled.
In its online survey of 400 U.S. credit card users conducted in August, Auriemma found that 11% of respondents had cancelled a credit card in the previous six months and, of those consumers, 17% said the card’s high interest rate was the one main reason. Moreover, 15% said they did not use the card regularly, while the same percentage cited having too many cards as the main reason for canceling.
Auriemma determined that 46% of respondents had held their canceled card for three or more years, while 68% held the card for more than one year.
Consumers appear to be holding on to cards longer, as 34% of respondents said they held on to the card for five or more years before canceling.
“What was most surprising is that consumers seemed to make note of the fact that they thought about [canceling] for quite awhile before doing something about it,” Scott Strumello, an associate at Auriemma, tells PaymentsSource. Card issuers should have had time to intervene when they saw that cards were not being used, but “it’s difficult to predict who’s going to close based on card usage and behavior,” he says.
Of the respondents’ cancelled cards, 53% were Visa-branded, 17% were MasterCards, 10% were American Express cards and 10% were from Discover cards, Auriemma says.
Increased competition could spur issuers to test more attractive interest-rate pricing, though the fight for the best, low-risk cardholders will be a tough one, Strumello says.
“It’s more challenging to attract and retain those customers with high FICO scores because they have so many offers in the mail and can take their pick,” he says.
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