Credit Card Issuers Focusing Growth on Different FICO Score Segments

The Wall Street Journal recently reported that credit card outstandings may reach the $1 trillion threshold in 2016, for the first time since before the 2008 Financial Crisis.  This is mainly due to overall economic growth and the rise in employment.  Issuers are now increasing their focus on growing outstandings by making aggressive acquisition-and-activation offers (American Express is currently offering a bonus of up to $300 on its Blue Cash Everyday Card), promoting lengthy introductory offers, and increasing credit lines for existing cardholders.

A big question for issuers is, should they concentrate efforts on particular FICO score segments, or seek to drive growth across the FICO score spectrum?  In the aftermath of the Financial Crisis and the resulting huge spike in charge-off rates, many leading issuers narrowed their focus, concentrating on the high-FICO score affluent segments, and ignoring subprime and low-prime consumers.  However, as the economy has continued to recover, at appears that some issuers have renewed interest in the lower-FICO score categories.

EMI’s analysis of leading issuers’ 1Q16 SEC filings reveals that issuers are following different approaches:

1. Growing outstandings across all FICO score segments.  Regional bank card issuers like Wells Fargo and Regions have relatively strong growth across all FICO score segments.  It is notable that the <600 subprime segment accounts for 9% of Wells Fargo’s outstandings, a higher percentage than for other issuers.  Wells Fargo issues a subprime card and recently incorporated a free FICO score into its mobile banking app.


2. Generating stronger outstandings growth in low-FICO score segments.  Capital One, Discover and SunTrust all have markedly strong growth rates in outstandings for low-FICO segments.  35% of Capital One’s outstandings come from the <660 FICO segment, whereas this segment accounts for only 18% of Discover’s outstandings.  Discover grew <660 outstandings by 12% (to $10.0 billion), and it is worth noting that Discover launched the Discover it Secured Card in January 2016.  SunTrust grew its <620 FICO portfolio by 39%, although this was coming from a low base of just $45 million.


3. Continuing to focus outstandings growth on higher FICO score segments.  The three largest issuers—Chase, Citi and Bank of America—all continue to experience declines in outstandings in their lower FICO score segments, which is offset by growth in higher FICO score categories.  Regional bank card issuer PNC also follows this pattern.


As issuers look to continue to grow outstandings (and appear to be willing to let charge-off rates rise from their current low levels), they will need to develop approaches to target the different FICO score segments, including:

  • Ensuring they have products in place to target different FICO score—and demographic—segments.
  • Developing messaging, pricing, acquisition/activation offers and ongoing incentives to both attract new cardholders and encourage existing cardholders to increase their spending and borrowing
  • Creating tools (such as free FICO scores) to educate consumers on understanding how their credit scores are determined and how they can practice good credit management

Multiple Motivations Drive Credit Card Issuers to Introduce New Plastic in 2016

The first four months of 2016 have seen a steady stream of new credit cards entering the market.  Issuers have a range of different objectives for introducing these new cards, including:

Filling gaps in the issuer’s product portfolio

  • PNC lacked a travel rewards card, so launched the Premier Traveler Visa Signature Card in April 2016.  The card features an earn rate of 2 miles per dollar, offers a choice of mileage redemption options, and carries an $85 annual fee (waived the first year).  The card also promotes a 30,000 bonus miles offer, and an introductory offer on balance transfers (most other travel cards have purchase-only introductory offers)
  • TD Bank launched the TD Cash Visa Signature Credit Card, which features an unlimited 2% cashback on dining, 1% on other purchases, a $100 cashback bonus, and no foreign transaction fees.


  • Discover introduced the Discover it Secured Card, which both expands the it suite and enables Discover to target higher-risk borrowers. Applicants for this secured card must deposit at least $200 to open an account.  Unlike many other secured cards, the Discover it Secured Card offers 1-2% cashback on spending.  It does not carry an annual fees, but does have an APR of 23.24%.

Launching enhanced versions of existing products

  • Chase’s new Freedom Unlimited Card has many of the same features as Chase Freedom (APR, introductory offer, bonus offer, fees).  However, the new card offers unlimited 1.5% cashback on all purchases (Chase Freedom had featured 5% on up to $1,500 spent in categories that changed quarterly).


  • American Express launched SimplyCash Business Plus, an enhanced version of its main small business cashback credit card, SimplyCash Business.  SimplyCash Plus Business Credit Card features charge card-like functionality, which allows cardholders to exceed their credit limit for specific large purchases.  However, these purchases must be fully paid for at the end of the billing cycle.
  • Wells Fargo introduced the Wells Fargo Propel American Express Card, the third in a series of Propel cards.  The card offers 3 points per dollar on gas, as well as 2 points per dollar at restaurants.  Cardholders who hold qualifying Wells Fargo checking or savings account receive a 10% points bonus.

Introducing new co-branded or private-label cards following new partnerships

  • Citi announced the launch of the Costco Anywhere Visa Card, following Costco’s well-publicized decision to split from American Express.  The new card features 4% on gas spending (on up to $7,000 in gas spend), 3% on travel and at restaurants, 2% on Costco purchases, and 1% on other purchases.
  • Barclaycard launched a suite of three JetBlue MasterCard credit cards (two consumer and one business), following JetBlue’s decision to switch from American Express.  All three cards feature no foreign transaction fees, in-flight savings, and a higher earn rate on JetBlue spending.


As issuers look to grow their card volumes and outstandings, they will need to regularly revisit their card portfolios to determine if they are meeting customers ever-changing payment needs and preferences.  Issuers should be prepared to act quickly to change elements of their card portfolio, e.g., adding new cards, enhancing existing cards, and even eliminating some cards.  And these product portfolio decisions should be supported by other card-related decisions, on pricing (interest rates and fees), incentives (bonus offers and introductory rates), ongoing rewards (earn rates and redemption options), and value-added features.