The Wallet Wars — Round 2 — Which card to use?

The Wallet Wars — Round 2 — Which card to use?

In Wallet wars — Part 1 I talked about the competition between credit cards, debit cards and cash. However, a credit card does not just have to compete with debit cards and cash — it also has to compete with other credit cards that the cardholder carries! For credit card issuers already wrestling with implications of the Credit Card Act, share of wallet presents an important issue. In addition to growing the base of issued credit cards, they also need to ensure that their card is the one that wins the largest share of wallet. This issue assumes even greater significance for no-fee credit cards, which may become completely unprofitable for the issuer if they are unused. There are some neat strategies to overcome this — find a clearly defined and frequent purchase (e.g., morning cup of coffee) and create a co-branded card that is automatically associated with the purchase!

(Refer below to Chart 1) Did you know that the average American credit card owner carries 4.4 credit cards, almost never uses 1 card, and rarely uses 1.6 cards? Of the 4.4 cards, only 2 cards are regularly used. The Wallet Wars are clearly skewed towards a few cards that the owner prefers to use over others! When I learnt this through a recently completed survey of credit card owners, I was intrigued — what drives the cardholder to use 2 cards regularly and either never or rarely use the others?

Red, blue, black "¦ which one to use?

Chart 2 below throws some light on these decisions. I found that the top two reasons why customers use a particular card are specific deals or just pure habit. Only 14% of customers have different cards for different purposes such as one for grocery, one for travel, etc. or one personal card and one they use for business. 36% select the card to use based on an attractive deal for that specific purchase, such as double hotel or airline points. 29% of customers — nearly one in every three — have one card they primarily use and use a different card only if the primary card does not work for some reason. Whether inertia or simplicity, the force of habit is clearly a compelling factor influencing the choice of which card to use.

There seemed to be a correlation between habit and tenure of the card. I found that the longer the cardholder owned the card, the greater the chances that they would use that card as their primary card. What this potentially means is that if card issuers provide incentives for regular use, the customer is more likely to be loyal, longer tenured and eventually use that card as the primary. In other words, some indicators on who may be a Wallet Wars winner!


  • On average credit card holders own multiple (4.4) cards but use only up to two cards frequently. Credit card issuers would want to ensure that their cards are among those two frequently used cards. This issue is even more important for no-fee credit cards
  • The two primary factors that drive which card is used most frequently are Habit and Rewards:
  1. Habit — Credit card owners who have one primary card that they use unless for some reason this card does not work — 29% of customers are in this segment
  2. Rewards — Credit card holders who decide which card to use for a certain purchase based on the rewards/deals they will receive on that particular card/purchase combination — 36% of customers are in this segment
  • Customers are most loyal to the card they use the most frequently. By creating incentives for tenured cardholders, credit card issuers can promote loyalty and thereby promote frequency of use

This is the second blog in a series of five blogs that Compete will publish on trends in the credit card industry during March-April. In April, Compete will also publish a whitepaper with more details on trends discussed in these blogs. To receive this complimentary whitepaper, please email your request to