50 Million Credit Card Outsiders May Be Winners as Banks Bid for Their Business

For years, the so-called “credit card outsiders,” a diverse group of American consumers that includes a variety of cohorts, have each independently resisted the credit card siren song of rewards points, cash-back offers, and financial flexibility.

Many of these individuals rely on cash, debit cards, or alternative financial services, often missing out on the benefits of building a solid credit history. Remarkably, these are not just fringe consumers but a group that is tens of millions strong and which boasts significant purchasing power.

Tapping into this market could be a game-changer for any financial institution (FI), and data from the new “Consumer Credit Access Report” by PYMNTS Intelligence in collaboration with Atelio reveals that the key to winning over this crowd might just lie in a tailored approach.

As banks and FinTechs battle for the attention of America’s credit card outsiders, the real winners could be consumers. That makes education and support crucial. Many of these individuals need guidance on how to use credit responsibly, not just a shiny new card in their wallet.

Among the four segments identified by PYMNTS Intelligence, “Second Chancers,” “Credit Curious,” “Gone for Goods” and “Never-Nevers,” it is the first two that could potentially represent the greatest total addressable market (TAM) to FIs and FinTechs.

Read more: How Banks Can Reengage the 53 Million Credit Outsiders

Deciphering Consumer Personas

Traditional credit cards often come with a web of fees, high-interest rates and complicated terms … precisely the kind of red flags that keep many outsiders away. The path to reengaging America’s credit outsiders lies in understanding their unique narratives, dispelling misconceptions, and offering tailored, trustworthy solutions that resonate with their financial aspirations and concerns.

Second Chancers are consumers who previously had a credit card but for various reasons — ranging from financial hardships to a deliberate decision to step away — no longer hold one.

Unlike the Gone for Goods, who have sworn off credit cards altogether, Second Chancers are open to reengaging if the terms and support structures are right. These individuals often need opportunities to rebuild their credit profiles and appreciate products that offer safety nets and transparency.

On the other hand, the Credit Curious have never owned a credit card but are interested in acquiring one. This group includes younger consumers and those who have primarily relied on alternative financial products such as buy now, pay later (BNPL) services or store credit.

The Credit Curious are often motivated by a desire to establish a credit history and unlock benefits such as rewards, convenience and enhanced purchasing power.

Secured credit cards present a promising solution for both groups. Unlike traditional credit cards, secured cards require a cash deposit as collateral, which minimizes risk for lenders while providing consumers with a manageable path to build or rebuild credit.

About 29% of credit outsiders, including many Second Chancers and Credit Curious, express interest in secured cards — surpassing the 28% interested in traditional credit cards.

Read more: What Credit Card Outsiders Want — and How FIs Can Bring Them Back

For Second Chancers, secured credit cards can offer a structured way to regain financial stability. Many of these consumers are looking for a chance to demonstrate financial responsibility and improve their credit scores without falling into the traps of high interest and fees that may have caused issues in the past.

Meanwhile, the Credit Curious can be drawn to secured cards as a safe starting point. These consumers are often cautious about debt but see the value in building a credit history. By offering educational resources and clear guidance, banks can help the Credit Curious transition from prepaid cards or BNPL services to a traditional credit system.

The journey to reengage the 53 million credit outsiders may not be without challenges, but for banks willing to invest in understanding and addressing these consumers’ needs, the rewards could be substantial.