26% of Consumers Say Interest Rates Influence Credit Product Choices

Consumers are increasingly focused on finding the best deal — a preference driven by loss aversion and a desire to maximize the benefits of their financial products.

When it comes to choosing a financial institution (FI) for their banking needs, it’s no different. Account holders prioritize attractive rates and favorable terms above all else.

According to findings detailed in the PYMNTS Intelligence report “Credit Union Innovation: How Credit Products’ Rates and Terms Impact FI Selection,” a collaboration with PSCU, interest rates and other terms are the most influential factors for 26% of consumers when deciding where to apply for credit products.

The study, which examined consumer criteria for choosing credit products — which could determine their choice of FIs — also revealed that credit products with attractive terms can influence account holders to switch their primary accounts to another institution.

Nearly 30% of consumers expressed a high likelihood of switching accounts for better terms on credit products. Among different age groups, millennials stand out as the most likely demographic to make such a switch, with 54% expressing a willingness to do so. This could be attributed to their prime earning years and the desire to maximize the benefits they derive from financial products.

According to the study, credit union (CU) members are even more likely to switch accounts based on terms, with 32% indicating their willingness to do so compared to 26% of non-CU members. This suggests that shopping for favorable terms is particularly important in the current economic climate, characterized by high inflation, rising federal interest rates and economic uncertainty.

Beyond interest rates, about 19% of consumers cited trust in an institution as the most influential factor when choosing a credit product. This came up higher than the ability to apply and monitor credit products through an app or site (13%) and convenience (11%).

Overall, the influence of interest rates and terms on the decision-making process is evident. FIs can capitalize on this preference by offering competitive rates and terms, and by doing so, position themselves as the favored choice for banking services.