What Causes Credit Card Users to Leave the Market — and How Secured Cards Can Win Them Back

Consumers’ financial lives are complex, with many factors contributing to their embrace — or rejection — of credit products. Credit card outsiders — our term for consumers who never entered or have left the credit market — have particular reasons for leaving. These reasons can differ between high- and low-income consumers.

Circumstances can also create negative financial situations, suggesting why consumers may show interest in secured credit cards. Secured credit cards have limits linked to collateral, forming a guardrail that can reassure outsiders looking to try or retry credit products.

PYMNTS Intelligence data finds core differences between high- and low-income outsiders that can shed light on what they value, why they opted to close their credit accounts and, ultimately, why secured cards could be a good fit.

In short, products tailored for low-income outsiders can offer the stability they value through spending controls and emergency safeguards. Tools that enhance financial planning and flexibility can benefit high-income outsiders, who typically have access to many payment methods.

This guide will help financial institutions (FIs) and issuers identify:

• Key income-driven motivations for causing consumers to leave the credit market
• Why and how secured cards could resonate with both high- and low-income outsiders
• Strategies for tailoring secured credit solutions to meet outsiders’ distinct needs

These are just some of the findings detailed in “What Causes Credit Card Users to Leave the Market — and How Secured Cards Can Win Them Back,” a PYMNTS Intelligence and Atelio collaboration. This edition examines the challenges and opportunities for FIs to reengage former credit users representing different income brackets. For this guide, we draw on insights from a survey of 2,630 U.S. consumers conducted from March 13 to April 2.

• Why Consumers Close A Credit Card
• Addressing Outsiders’ Payment Challenges
• Supporting Credit Card Outsiders Through Life Events
• Tailored Solutions for Credit Card Outsiders
• Read More
• Methodology

Why Consumers Close A Credit Card

Divergent trends revealed among income brackets

Data shows major differences in why low- and high-income credit card outsiders leave the credit market. Twenty-six percent of credit card outsiders report difficulty paying monthly balances as the primary reason for closing their accounts. This challenge disproportionately affects low-income consumers, with 32% citing payment difficulties as their main concern. That share for high-income consumers is much lower: Just 20% of these outsiders considered payment difficulties the top concern.

Account closures by high-income outsiders are less often because of the ability to pay and more about having access to other payment methods. For example, 19% said they prefer to rely on accumulated wealth. Additionally, 7% of high-income consumers said they closed accounts to use other credit sources. For comparison, just 2% of low-income consumers closed accounts to use other credit options.

These distinct reasons reflect broader financial patterns: low-income outsiders seek immediate relief from financial strain, while high-income ones prioritize optimization and control. Together, these insights frame an opportunity for secured credit solution providers that can position their products to best serve each population’s needs.

Addressing Outsiders’ Payment Challenges

Low-income focus: Overcoming financial strain

Although both income brackets share the core action of closing an account, our findings highlight the value of tailoring secured card offerings to income-specific challenges. As mentioned, payment difficulties are a more regular challenge for low-income consumers. And as we will detail, unexpected events such as job losses can exacerbate payment challenges.

Secured credit cards can alleviate these issues through spending limits tied to deposits and spend management tools. These core features offer low-income users the control they need to manage balances effectively and avoid financial overextension.

High-income focus: Adding value to credit card options

The key challenge for reaching high-income outsiders is demonstrating the value of secured credit cards. Since many of these consumers already have access to alternative credit or wealth, they seek features like rewards programs, flexible payment options and financial planning tools. By integrating and publicizing these benefits, secured cards can position themselves as complementary assets high-income users want to have in their financial portfolios.

It is also worth noting that overall interest in secured credit cards is highest among consumers annually earning more than $100,000. Nearly half of these consumers report interest.

Supporting Credit Card Outsiders Through Life Events

Low-income consumers: Responding to unpredictable changes

While financial planning can allay some key consumer concerns, life doesn’t always go according to plan. Unpredictable life events exacerbate financial strains, especially for low-income consumers. Experiences such as disability/illness or a change in household composition disproportionately affect these individuals. Each impacts approximately 15% of low-income consumers.

Similarly, low-income consumers were 27% more likely to report that a change in employment status negatively affected their finances than high-income consumers.

These and similar situations often leave consumers financially vulnerable. As low-income consumers find it especially challenging to overcome unexpected expenses and changes, outsiders from this income bracket can be especially vulnerable. Secured cards can offer a potential lifeline by providing controlled access to credit during emergencies. Marketing these cards as safety nets that promote stability can resonate strongly with this demographic, addressing practical and emotional concerns.

High-income consumers: Planning for predictable expenses

Data shows that high-income consumers are more likely to face financial challenges from planned but significant expenses. Among those who closed accounts, 8% cited moving to a new home as a factor that negatively affected their finances, while 10% reported education expenses — this is five times as high as the share of low-income consumers who reported educational expenses had a significant impact (2%). These events require careful financial management, even for consumers with substantial resources.

Secured credit cards can add value for these consumers by offering tools to help manage these planned expenses, such as adjustable credit limits and budgeting features. For high-income credit card outsiders, these cards can serve as enablers for strategic financial planning.

Tailored Solutions for Credit Card Outsiders

Product features appealing to low-income consumers

Secured cards that emphasize simplicity and stability benefit low-income consumers the most. In doing so, they can help alleviate the apprehension many consumers who have closed accounts may feel from prior bad experiences with conventional credit solutions. Features such as transparent repayment terms, low fees and emergency-use safeguards can help them reengage with credit confidently. These solutions address these consumers’ core challenges: payment difficulties and financial unpredictability.

Product features appealing to high-income consumers

For high-income users, the focus shifts to products that align with their financial goals. Secured cards offering flexibility, rewards and integration with other financial tools can appeal to their preference for optimization and control. Secured card issuers can clarify these tools’ value by positioning these products as complementary to high-income customers’ existing financial strategies.

Read More

PYMNTS Intelligence is the leading provider of information on the trends driving consumer interest in their credit options. To stay up to date, subscribe to our newsletters and read our in-depth reports.

• How FIs Can Identify and Attract Credit Card Outsiders
• Who Is the Credit Card Outsider? … And How Do They Get Access?
• Prime Candidates for Secure Credit Cards Include Young and Wealthy Consumers

Methodology

“What Causes Credit Card Users to Leave the Market — and How Secured Cards Can Win Them Back,” a PYMNTS Intelligence and Atelio collaboration, is based on a survey of 2,630 U.S. consumers conducted from March 13 to April 2. The survey examines reasons for credit abandonment and interest in secured credit solutions. The sample was census balanced with regard to demographics and income-level segmentation, ensuring comprehensive insights into consumer behavior.