62% of Consumers Without Traditional Credit Cards Already Use Credit

Many consumers without traditional credit cards are more receptive to credit-like products such as store cards and buy now, pay later plans, signaling a potential opening for financial institutions willing to tailor their offerings.

A new report, “Decision Guide: What Credit Card Outsiders Want — and How FIs Can Bring Them Back,” a collaboration between PYMNTS Intelligence and Atelio by FIS, explores the financial behaviors and preferences of U.S. consumers who do not hold traditional credit cards.

The study, based on a survey of 2,630 U.S. consumers conducted in early 2024, identifies distinct personas among these “credit card outsiders,” including “second chancers” who previously had credit cards, “credit curious” individuals interested in obtaining one, “gone for goods” consumers no longer interested, and “never-nevers” who have never had a credit card and have no interest in one.

The research highlights that a significant majority of these outsiders, 62%, already use some form of credit, most notably store cards and buy now, pay later (BNPL) services, suggesting a preference for accessible, short-term credit solutions rather than traditional loans. This inclination indicates that financial institutions have an opportunity to engage these consumers by offering flexible, low-commitment credit tools that align with their existing financial habits.

The report further explores the specific credit solutions that appeal most to these consumers, with secured credit cards ranking as the most sought-after product at 29% interest, closely followed by traditional credit cards at 28% and BNPL services at 27%. This strong interest in secured cards, particularly among the credit-curious and second-chancers, underscores their potential as a gateway for reengaging these segments, as they offer both credit-building potential and accessibility.

However, the study also identifies key obstacles to the adoption of secured credit cards, with 1 in 3 outsiders citing a lack of necessary upfront funds as the primary barrier. Other significant concerns include the perception that secured cards do not improve spending flexibility (also cited by 1 in 3), high interest rates or annual fees (32%), and the reluctance to carry debt on such a card (29%).

These findings emphasize the need for financial institutions to address both the financial and psychological barriers preventing credit card outsiders from adopting traditional credit products.

Key data points from the report include:

• 62% of credit card outsiders already hold at least one type of credit account, with store cards and BNPL plans being the most popular. This highlights that these consumers are not necessarily averse to credit but favor certain types of accessible, short-term options.
• Secured credit cards are the most appealing new credit product for outsiders (29%), followed closely by traditional credit cards (28%) and BNPL (27%). This indicates a willingness among many outsiders, especially second chancers and the credit curious, to consider more traditional credit products if the terms and accessibility are right.
• The lack of upfront funds is the biggest hurdle for credit card outsiders considering secured credit cards, cited by 1 in 3 respondents. This financial constraint suggests that lower deposit requirements and clear communication about the long-term benefits could improve adoption rates.

Beyond these core findings, the report also delves into the varying levels of interest in different financial products based on creditworthiness, noting that consumers with higher (implied) credit scores tend to hold a broader range of products, including personal loans, auto loans, and mortgages.

The report further segments the credit card outsider population by their reasons for not having or wanting credit cards, revealing distinct financial apprehensions and preferences among the never-nevers, gone for goods, second chancers, and credit curious.

Understanding these nuanced perspectives is crucial for financial institutions aiming to develop tailored product offerings and effective marketing strategies to reengage this segment of the consumer market. The study underscores the importance of building trust and offering transparent, flexible and accessible credit solutions to attract and serve these often-overlooked consumers.

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