A Key Indicator of How Consumers Use Credit

Credit habits reflect a mix of priorities and financial constraints. Some consumers focus on maximizing rewards, leading them to use credit cards heavily. Others want to use a wider range of credit products, either to maximize financial flexibility or just to stay afloat.

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PYMNTS Intelligence’s latest report dives into these key differences in credit use and demand across credit user personas — key groups of credit users whose tendencies shed light on nuances in the credit ecosystem.

For example, consumers who fit our persona group of reward seekers are much less likely than others to have or want loan products. Meanwhile, loans play a central role for other consumers, especially those we classify as being on the credit treadmill, struggling to make minimum payments. Nontraditional credit products, such as debt consolidation and payday loans, represent the widest usage gaps.

These are just some of the findings detailed in “Rewards Seekers Show Less Appetite for Loans,” a PYMNTS Intelligence special report. The report examines consumer credit use across credit user personas. It draws on insights from a survey of 2,336 U.S. consumers conducted from Nov. 8 to Nov. 16.

The Loan Gap

Loans hold less appeal for reward seekers than for other consumer.

When it comes to credit, we see a clear divide among consumers. Reward seekers have 2.4 credit products, on average, while credit treadmill and cash cushion consumers average 3.1, about 29% more. Reward seekers hold slightly more credit and store cards, on average, than the other two groups, making the higher averages for other personas stand out.

Closer analysis reveals that the difference in loans accounts for the gap. Reward seekers hold just 0.7 traditional loan products — home, auto, student and personal loans — on average. Meanwhile, cash cushion and credit treadmill users have 1.1 on average, or 57% more. The difference grows for nontraditional products, such as debt consolidation and payday loans. Reward seekers hold just 0.2 of these products on average, while cash cushion and credit treadmill users each have more than twice as many.

Overall, the data highlights an important split in how consumers are approaching credit. Reward seekers tend to focus on using their favorite credit products to strategically maximize earn points, miles and other benefits. Meanwhile, the other two personas likely want or need to use additional credit products to maintain financial flexibility.

Loans and the Credit Treadmill

Credit treadmill consumers are especially likely to have student loans and high-interest loans.

Credit treadmill consumers struggle to keep up with payments and typically seek additional credit lifelines. Student loans are a key factor in this dynamic. Twenty-one percent of credit treadmill consumers have student loans, more than the corresponding 17% of cash cushion users and 6.6% of reward seekers. At the same time, credit treadmill consumers are much less likely to have completed a college degree than reward seekers, at 13% versus 51%, respectively. This suggests that many in the credit treadmill group could be saddled with payments for incomplete degrees that did not boost their earnings.

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The financial picture for credit treadmill consumers becomes clearer for nontraditional loans. Twenty-one percent of the credit treadmill persona group has at least one debt consolidation, home equity, pawn shop, payday or rent-to-own loan. This exceeds the corresponding 17% for credit cushion users and 7% for reward seekers. Notably, credit treadmill consumers are particularly likely to have loan types that tend to have high interest rates. For example, 13% have a payday loan, versus 8.7% for cash cushion users and 2.9% for reward seekers. Debt consolidation follows a similar pattern, with a leading 9.2% of credit treadmill consumers holding these loans, more than the 7.3% of cash cushion users and 2.4% of reward seekers.

Interest in New Loans

Credit treadmill and cash cushion consumers are more interested in getting new loans than reward seekers.

Regardless of credit persona, the average consumer is interested in obtaining about two new credit products. Reward seekers come in at 2.1 new products, on average, versus two for credit treadmill and 2.2 for cash cushion consumers.

Differences are clearer when we zoom in on loans, especially nontraditional ones. Reward seekers want 0.4 new nontraditional loan products, on average. This climbs to 0.68 wanted additional nontraditional loan products for credit treadmill consumers, a 70% increase, followed closely the 0.64 wanted by cash cushion users. For traditional loans, the difference is smaller but still sizable, with reward seekers wanting 0.34 on average and the other two groups each averaging 0.43.

A particularly large gap is present for debt consolidation loans. Only 5.2% of reward seekers indicate interest in obtaining this product, but that share jumps nearly fourfold for the other personas. To be exact, 19% of credit treadmill consumers and 18% of cash cushion users are interested in debt consolidation loans. This highlights a notable trait of reward seekers: that they rarely look for financing out of necessity.

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Methodology

“Rewards Seekers Show Less Appetite for Loans,” a PYMNTS Intelligence exclusive report, is based on a survey of 2,336 U.S. consumers conducted from Nov. 8 to Nov. 18. The report examines consumer credit use across credit user personas. Our sample was census-balanced to reflect the U.S. population: 51% of respondents identified as women, the average age of respondents was 48 and 38% earned more than $100,000 annually.