California: The Plastic Society : Irvine Firm's Study Finds the State's Consumers Hungry for Credit Cards

By JAMES S. GRANELLI

June 12, 1988 12 AM PT

Times Staff Writer

Although their billfolds are bulging with plastic money, Californians can’t seem to get enough credit cards.

California consumers already carry around an average of six credit cards, and 43% want even more, according to a statewide survey conducted by an Irvine marketing firm.

The figure is nearly twice as high as previously thought, say marketing consultants who have studied credit card trends.

“Clearly, the appetite for credit cards has not been satisfied,” said Gregory J. Bjorndahl, managing partner of the West Coast Group, an Irvine marketing firm that commissioned the survey.

That appetite apparently isn’t limitless, though. About 10% of the 600 consumers interviewed in hourlong videotaped sessions said they had canceled a card within the last year, and an additional 10% said they were thinking of canceling a card.

Even so, more consumers are increasing their use of cards than cutting back on credit purchases, the survey found.

Federal Reserve Board statistics show that the amount of consumer revolving debt outstanding across the nation has been growing steadily, though the rate of growth has slowed somewhat in the last four years. Revolving debt rose at an annual rate of 11.7% in April to a total of $167.3 billion. The California survey did not measure credit account balances.

Consumers who want more cards, the survey found, generally are looking for banks and other card issuers offering better incentives--such as lower interest rates, no annual fees, and bonus points they can earn toward discount purchases of merchandise or even airline mileage.

Some of those consumers also want to “trade up” to a general purpose card from a department store card or to a “gold” card from a standard card.

“What’s happening is that people are leaving certain cards in their wallet and using newly acquired ones,” Bjorndahl said. “Switching of cards is occurring faster than actual canceling of cards.”

Consumers also want more cards to show they are good credit risks, the survey found.

“Overwhelmingly, the message that came through was that people really believe they need to keep an excellent credit record,” Bjorndahl said.

Partial results of the survey, conducted at 10 sites from Sacramento to San Diego, were made available to The Times last week. Major results of the survey will be released on Monday.

The poll covered consumer use of a variety of cards, including oil company, department store, telephone, frequent flier and automated teller machine cards.

ATM cards, in fact, are carried by more consumers--70%--than any other card, the survey found. A third of those said ATM cards were their most important cards. Besides being used to retrieve cash and make deposits at ATMs, the cards often can be used at grocery stores and gasoline stations to pay for purchases directly from bank accounts.

The survey is expected to help credit card companies battle for “shelf space” in the wallets of consumers. Besides statistical information, the survey includes detailed explanations of why consumers have the cards they do and how they use their cards.

“I’ve never heard of a survey like this ever being done, though I suspect credit card companies may have used focus groups to try to find out this kind of information,” said Thomas A. Durkin, director of research at the American Financial Services Assn., a Washington-based consumer credit information firm.

Durkin said the conventional wisdom among bankers has been that the credit card market is a “mature market,” meaning most consumers who want cards already have them.

He said he was surprised that so many Californians want additional cards, though he pointed out that the state’s vibrant and growing economy is attracting a flood of credit card solicitations, many offering incentives, from financial institutions nationwide.

Maryland Bank, N.A., for instance, is a major marketer of Visa cards. Bjorndahl holds one that offers a free mile of air travel on USAir for every dollar charged.

The bank also offers a number of MasterCard and Visa “affinity” cards through clubs or other organizations that get fees or donations based on usage. Maryland Bank, for instance, markets a MasterCard imprinted with the name of the Republican Party of Orange County.

The fact that consumers are aware of such incentives in dicates that they have been reading the massive direct-mail solicitations that credit card companies have been sending to Californians, Bjorndahl said.

Executives at Bank of America, which pioneered all-purpose charge cards in 1958, did not want to discuss details of the survey until after they attended Monday’s briefing.

“What’s seems to be unusual to us, based on what little we know about it so far, is that it is California-oriented,” said Shirley Norton, a bank spokeswoman. “Most of what we get through surveys by Visa and MasterCard is nationally oriented.”

About 64% of Californians carry credit cards in their wallets, according to the survey. And though they carry an average of six charge cards in a wallet, they often have more cards at home.

And those wallets have evolved over the years to reflect increasing consumer interest in credit cards. Today’s designs include more slots to carry a greater number of cards, Bjorndahl said.

Apparently, a single wallet is not enough for some people. About 25% of surveyed consumers said they have second wallets for their cards, and 33% said they keep cards in locations other than their wallets, the survey found.

Among the survey results are findings that:

- Visa is the most widely held credit card, with 53% carrying it. And 40% of Visa holders consider the card their most important. No other card has that high a level of importance attached to it.

- Among those interested in acquiring an additional card, more than half want a Visa or MasterCard, and 25% want an American Express card. And while 20% are interested in acquiring a “gold” or “premier” card offering additional benefits, interest declines by half among those who could qualify for such cards.

- Bonus points, airline mileage and cash rebates are the most favored incentives for acquiring credit cards. Discover’s 1% rebate on total purchase amounts charged in one year is one of the most popular incentives. Of the 13% who held Discover cards, 48% said they acquired it and are using it because of the rebate feature.

- Far behind on the list of favored incentives are lower interest rates and lower or no annual fees.

- Supermarket, oil company and telephone cards are the least important cards. Only 18% use oil company cards to pay for gasoline. Passing up plastic altogether, 79% pay cash to fill their tanks, reflecting the desire for cash discounts offered at the pumps and the self-service nature of the business.

- Department store charge cards are most likely to be left outside the wallet or in a separate wallet not carried regularly by consumers. That may be one reason why 55% of surveyed consumers usually pay cash for purchases, while only 29% use department store cards.

Bjorndahl said most charge card holders interviewed manage their finances well and want the added credit simply for emergencies, such as paying unexpected hospital bills. They also tended to believe that they would be better off in the future, he said.

Some of those interviewed described passionately their feelings about credit cards and revealed some family secrets.

One woman, in explaining why she had no interest in the American Express Optima card, said that when she was young, MasterCard “took a chance on me” and that “come hell or high water, I will stick with them.”

One man worried about how easy it is to get credit cards. His 18-year-old son was sent an offer saying he had been accepted for a $500 line of credit. “Luckily, he didn’t see that one,” the man said.

One woman said her son had 10 Visa cards because they were so easy to get.

And another woman said she keeps all her department store credit cards in a dresser drawer.

“I try to keep them nicely stacked,” she said.

CARD OWNERSHIP

The percentage of consumers surveyed who own certain types of credit cards and bank automated teller machine cards.

Bank ATM Cards: 70%

Visa: 53%

Oil Company: 34%

MasterCard: 32%

Discover: 13%

American Express:12%

CARD USAGE AMONG CURRENT OWNERS