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Secured Credit Cards: An Alternative Path to Mainstream Card Products

  • ID: 2947156
  • Report
  • September 2014
  • Region: Global, United States
  • 19 Pages
  • Mercator Advisory Group
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Issuers Revisit an Important Credit Product

FEATURED COMPANIES

  • Bank of America
  • Capital One
  • Fifth Third Bank
  • Navy Federal Credit Union
  • Synovus Bank
  • USAA
  • MORE
Secured Cards Cement Long-Term Credit Relationships

Unbanked and underbanked consumers, many of whom have modest incomes, face numerous financial challenges. In recent years, product development designed to serve these individuals has almost exclusively leveraged prepaid accounts. Meanwhile, consumers have become much more aware of the importance of building and maintaining a good credit score - a goal not typically achieved with prepaid products. Regulatory and profitability challenges have caused some providers of secured credit cards to leave the market, although a few national financial institutions as well as several smaller ones are finding ways to make their products successful. Opportunity awaits issuers that are willing to reevaluate this underdeveloped product. Millions of consumers - young adults, recent immigrants, and consumers with past financial difficulties—are in need of credit building tools.

The research report 'Secured Credit Cards: An Alternative Path to Mainstream Card Products' examines the competitive landscape for secured credit cards, reviewing emerging products’ features and positioning.

“Secured credit cards are a valuable tool for consumers to build or rebuild credit,” comments Michael Misasi, senior analyst and one of the report’s authors. “Financial institutions should not overlook the opportunity to establish long-term relationships with secured credit products.”

Highlights of this research report include:

- A review of the secured card product landscape

- A discussion of the relevant target markets for secured cards, thin/no file and subprime

- Estimated addressable market (number of consumers) for various secured card market segments

- An analysis of key product trends such as upsell strategies, use of partially-secured cards, and the budgeting use case
Note: Product cover images may vary from those shown
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FEATURED COMPANIES

  • Bank of America
  • Capital One
  • Fifth Third Bank
  • Navy Federal Credit Union
  • Synovus Bank
  • USAA
  • MORE
Executive Summary

Introduction

Overview of Secured Credit Card Products
Fully Secured and Partially Secured Credit Cards

Business Model

Potential Market and Customer Base for Secured Credit Cards
Thin File/No File Demographic (Immigrants and Young Adults)
Subprime Demographic

Market and Competition for Secured Credit Cards
Market Players in the United States
Credit Limits
Starting APR and No-Penalty APR
Rewards and Cobranded Programs

Industry Positioning of the Product Suite
Turn-down Product
Direct Sell
Cross-Sell Product

Product Trends
Graduation Policy
Partially Secured Cards
Budgeting Tool
Personal Financial Management Tools

Regulatory and Risk Considerations for Secured Credit Programs
Risk Considerations
Regulatory Considerations

The Relationship Between Prepaid and Secured Credit Cards

Conclusion: Strategic Implications and Opportunities
Endnotes
For more information about this report

Figures and Tables

Figure 1: A Large Proportion of the UPoor Credit History
Figure 2: Distribution of FICO Scores in the U–2013
Figure 3: Maximum Credit Limits for the 18 Secured Credit Card Products Reviewed

Table 1: Thin File/No File Market Opportunity
Table 2: Review of 18 Select Secured Credit Card Products in the United States
Note: Product cover images may vary from those shown
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- Bank of America
- Capital Bank
- Capital One
- Digital Credit Union
- First National Bank of Omaha
- Fifth Third Bank
- Merrick Bank
- Navy Federal Credit Union
- Suntrust
- Synovus Bank
- US Bank
- USAA
- Wells Fargo
Note: Product cover images may vary from those shown
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