WalletHub recently did a survey of consumers to identify the state of credit card debt in the U.S.
Overall the indicators are that people are using credit, and individual debt has risen to level we haven’t seen since just before the great recession. As those of us who have been through it before have seen, this is a mixed bag of news. What we want to encourage is the responsible use of credit in a way where consumers do not get in over their heads. The bad news? Charge-offs are starting to rise year over year. That is a trend nobody wants to see continue.
What can be done? Credit card issuers, retailers and others have an opportunity to communicate with their customers and prospects through education and outreach to help people understand credit better and use their cards in the most responsible ways. Here are some ways retailers can help:
- Create a content strategy to help educate consumers – provide educational materials on your website, social media, apps, etc. to help people new to credit understand how it works and provide tips for responsible uses of credit. We know that different things motivate card users to accumulate debt. They may be driven by optimism fueled by a raise, needing to fund a short-term project or it may be someone is in over their head financially. Addressing all potential scenarios gives credit card issuers/retailers the chance to address the concerns and interests of customers and prospects.
- Keep consumers aware of their role in building their FICO credit score. Providing information about the FICO score and keeping customers updated to changes to the FICO score algorithm – like the 2017 changes to exclude early medical bills, many civil suits and tax liens – will help them manage their credit better, to potentially qualify for lower rates.
- Highlight your rewards in a benefit-driven way to the consumer showing how rewards can help your customers manage their finances better, by:
- Using points to pay for an annual fee
- Buying items they need at a discount through loyalty deals or shopping sites
- Paying down balances by using cash-back rewards, points or other options available
- Use your card niche to help – for instance, if you have a travel card, rewards can help people save and plan for a friend or family get-away or visit by using miles or companion tickets. Cards with lower rates can help alleviate the pain of necessary big-ticket items or home maintenance costs or to pay down debt balances faster. Retail cards have special triple points/loyal customer savings days and cash back for purchases to help defray the costs of seasonal, back to school or other clothes purchasing occasions.
- Consider your audiences’ life stage – illustrate the important points of credit management that are relevant to your different customer groups. Millennials are looking for information online to educate themselves, GenZ is starting their foray into credit and expect seamless online financial tools to help them, GenX is in the sweet spot of their careers and may be looking for smart ways to use credit to leverage all the things they need to get done. And, don’t forget about Baby Boomers who are redefining retirement and will continue to need and use credit to their advantage post retirement.
- Mix up your media use – success stories, industry research and data and other content can be served up in short form, blogs, social media posts, video, polls and infographics or long form, eBooks, white papers, in depth survey results, etc. Different people like to engage with content in different ways and channels, so give them the opportunity.
Smart credit decisions and loyalty are built through the consistent communication of relevant content. Retailers and credit card issuers who realize this and provide the best content strategy for their customers will help customers understand and use credit in the best ways, so everyone benefits. We’d love to hear your success stories!