Dec 18 2015

Linking Member Satisfaction to Credit Card Decisions: A Wallet Allocation Rule Approach

The year 2014 was an impressive one for credit card growth rates in the credit union system. Credit card balances grew 8.6% to $46.5 billion (B). Moreover, the industry grew 7.7% by adding 1.2 million active credit cards. These outstanding growth rates clearly demonstrate that credit unions have advantages over their bank competitors for a significant number of credit union members. Yet, credit cards are an area of competitive weakness for credit unions. In fact, the top seven card issuers account for approximately 75% of all credit card purchases made in the United States. None of the top issuers is a credit union. Additionally, credit cards are an area with very high multi-brand (i.e., multi-card) usage.

Issuing a credit card to a member is just the start. We wanted to know why credit union members sometimes use their credit union credit card and sometimes use one from a competitor. To learn more, we contacted members of nine US credit unions to ensure a wide variety of institutions in our study. In total, 1,649 credit union members provided insight into their use of 3,487 different credit cards.

To link members’ perceptions and attitudes to their share of spending and share of balances, this study applied the Wallet Allocation Rule to uncover the primary reasons members chose to use credit cards issued by the studied credit union, a competing credit union, or a bank. Instead of focusing on a customer’s absolute satisfaction (or Net Promoter Score) level, the Wallet Allocation Rule focuses instead on the relative rank that this satisfaction level represents vis‑.-vis the competitors the customer also uses.

Filene thanks its generous supporters for making this important research possible.

Report Number 380