3.3 Million1 credit card customers trapped as applications are rejected

LONDON, September 25th, 2013

In the next month alone, these rejections could cost British consumers £1082 million in interest.

  • Of those declined in the last year, 36% stuck with their existing deal to avoid risking another rejection, but 22% immediately went on to make another application with little consideration for the consequences.
  • Almost one million3 people checked their credit record to investigate the cause of the problem and more than one in ten (12%) went straight to the card provider to challenge the decision.
  • On average, consumers stick with the same card for five years. For 2.2 million4 credit card holders, footprint phobia, the fear of credit rejection, is the main reason cited for long term relationships.
  • Additional reasons for this ‘clingy card’ culture include; 24% don’t think they’ll save money, one in five (20%) can’t be bothered to search for better deals, 14% naively rely on their bank and 4% just like the colour.
  • On the flip side, best buy deals have never been so competitive with 69%5 of all credit cards available providing a 0% balance transfer facility for up to 28 months – 63%6 of these are interest free for 12 months or more.

New research released today from TotallyMoney.com, the credit comparison experts, reveals that in the last year alone almost 3.3 million1 credit card customers have had applications for competitive new credit cards rejected. These consumers are left languishing on deals which could be costing £108 million2 a month in interest payments. As credit card providers continue to entice new customers with some of the most competitive deals in history, this is a major issue for consumers with a less than perfect credit record. These rejection rates could explain why less than 5% of consumers have compared and switched credit cards in the last 12 months, keeping the same product for an average of five years.
Life after rejection
The research, which examined the behaviour of 2,000 UK credit card holders, also reveals that of those rejected for a new card, 36% didn’t want to risk further declines so stuck with their existing deal. Almost one million3 people went on to check their credit record to find out why they were declined, while just 12% took the initiative to contact the provider for feedback. 735,0007 went on to apply for another credit card straight away, potentially causing further damage to their credit record.
Footprint phobia
With so many people unable to clinch a better deal, a widespread culture of ‘footprint phobia’ is inhibiting the behaviour of 2.2 million5 UK consumers. The fear of negative footprints on credit records is deterring people from applying for chart topping deals, resulting in the average consumer sticking with the same card for just over five years – or for 16% for more than ten. Overall, this means that on average consumers will have just 12 credit cards8 throughout their life.
It’s not you, it’s me
Simple reasons for credit card rejections include not being on the electoral register, which is the case for six million UK adults9, or missing credit card payments in the last two years which 7.3 million (24%)10 credit card holders admit to. However, for many consumers, best buy deals are simply not an option as most of these cards are only available to those with the highest scores. Consumers can protect themselves by using a credit comparison service with a pre-application eligibility checker, such as TotallyMoney.com, instead of applying directly to the credit card provider. This will recommend the cards that the individual is most likely to be accepted for without leaving negative footprints. Overall, consumers will double their chances of being accepted by using this facility.
Long term relationships with credit cards
Reasons cited for keeping credit cards for such long periods of time range from almost one in four (24%) who don’t think they’ll save money by taking out a new credit card to 20% who admit they just can’t be bothered to look for a new card. Many consumers (14%) trust their bank to get the best deal instead of shopping around. This could be a risky strategy as many best buy deals are only available to new customers. At the other end of the spectrum, 5% of credit card holders retain the same card as they like the status associated with it and 4% simply base their decision on liking the colour.
Best buy Britain
When it comes to how much money it would take to lure credit card holders onto the next best deal, 33% claimed that no amount of money would encourage them to take action. Of the 67% that would, an average of £137 was the optimum amount to jolt consumers into moving. 5% of those that would consider a new deal, look for a saving of at least £500. Given consumers can save up to £650 by moving to a market leading balance transfer deal, this by far outstrips the average expectation.
Will Becker, CEO and co-founder of TotallyMoney.com comments: “These are frustrating times for credit card customers as they are bombarded with some of the best balance transfer deals in history but they simply cannot get them. Consumers must be aware that all that glitters really isn’t gold and many of these deals are only available to those with a squeaky clean credit record. Eligibility checking is a key solution to this problem as it’s an easy way of checking eligibility for a deal without leaving a footprint on your credit record.
“For those that do find themselves with a declined application for a new credit card it’s not the end of the world. The important thing is not to carry on making applications which could cause further damage. For many people it may be as simple making sure you’re on the electoral register or correcting mistakes on your credit record.”
To research the best credit card deals available, visit TotallyMoney.com. The website enables consumers to see exactly how much money they will earn or save by switching to the best deals based on annual spend, borrowing and repayments. It also identifies which of these deals consumers are actually eligible for currently a major inefficiency with rejection rates hitting 70%.

ENDS

About TotallyMoney.com:

TotallyMoney.com, launched in 2007, is the UK’s leading credit-focussed comparison website which sets out to make it simpler for consumers to compare credit cards, loans and mortgages. With a revolutionary approach to credit comparison, TotallyMoney.com uses exceptional comparison tools to empower people to make better financial choices.
As part of the Media Ingenuity Group, TotallyMoney.com sits alongside affinity credit card brands. Fluid is a portfolio of market leading ‘prime’ products issued in partnership with MBNA, Luma a ‘sub-prime’ credit card partnership with Capital One and Granite card with Vanquis Bank. Being both a credit comparison service and a marketer of credit card brands gives the business a unique and in-depth perspective of the industry.

Notes to Editors

All calculations are based on research carried out through OnePoll from the 23rd – 29th August 2013 amongst 2,000 credit card holders. In addition, 1,103 credit card holders were asked what type of credit card is their main card.
1 There are 30,300,000 credit card holders in the UK – source UK Plastics Report 2013.
10.9% of 30,300,000 = 3,291,302 credit card customers have been rejected for credit cards in the last 12 months (TotallyMoney.com survey – September 2013).
2 TotallyMoney.com analysis shows that a credit card rejection can potentially cost a card holder £336 in interest over the course of 12 months.
£395.19 x 3,291,302 = £1.3 billion in interest in a year or £108 million each month.
3 26.46% of 3,291,302 = 871,000 of those rejected went on to check their credit score.
4 11.13% of people who have had their card for more than two years (totalling 20,600,000) = 2,290,086 credit card holders are afraid of applying for a new credit card due to being rejected within the last 12 months
5 Based on TotallyMoney.com market analysis 69% of credit cards currently on the market offer an introductory 0% balance transfer period (Defaqto – August 30th 2013)
6 Based on TotallyMoney.com market analysis 63.1% of credit cards with an introductory 0% balance transfer period have a period of 12 months or longer (Defaqto – August 30th 2013)
7 22% of those rejected 3,291,302 = 735,000
8 Consumers have an average of 12 credit cards in their lifetime.

    Average life expectancy is 80 (ONS)
  • Consumers are eligible for credit cards from the age of 18. 18-80 totals 62 years.
  • 62 divided by 5 = 12.4 credit cards in their lifetime.

9 Six million consumers are not on the electoral register (Electoral commission report – December 2011).
10 24.1% of all credit card holders have missed a payment in the last two years totalling 7,305,910.

 

For more information, please contact James McCaffrey

About TotallyMoney

TotallyMoney has been championing fairer and better consumer credit since 2007 by helping customers make smart borrowing decisions. We won Best Free Credit Report Provider in the 2018 Moneynet Personal Finance Awards and, in under 12 months, our Free Credit Report has already put more than 500,000 customers in control of their credit data.

Plus, we pioneered soft searching and eligibility scoring to reduce customers’ risk of being rejected for credit. Our services are designed to simplify personal finance, helping customers improve their credit rating and find the best products to meet their needs. To date, our platform powers the likes of Confused.com, Noddle, and ClearScore to name but a few.