Who is the target audience of premium credit cards (such as Chase Sapphire Reserve, Citi Prestige, and Amex Platinum)?

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Who is the target audience of premium credit cards (such as Chase Sapphire Reserve, Citi Prestige, and Amex Platinum)?

According to the Federal Reserve, roughly 70% of American consumers had at least 1 credit card, as of 2015. Out of this total credit card market, premium credit cards accounted for 19% in 2016. Although there is no comprehensive, pre-compiled demographic information of these premium credit card holders, there are some breakdowns of the consumer base. Premium credit card issuers mainly target the mass affluent segment of society, which is defined as those who have between $500,000 and $1,000,000 in investable assets. The result is an average annual household income of $741,170 for premium cardholders. Although millennials have long avoided credit cards, there is a significant growing trend of premium cardholders between the ages of 25 and 34. American Express estimates one third of their new consumers in 2016 were millennials, while CitiGroup states that roughly 50% of their Prestige cardholders are millennials. There is no information on the gender of premium credit card users, but due to the higher average income, credit scores and credit limits of men, one can assume that men make up a higher proportion of the premium credit card market.

Income

Premium cardholders tend to amass 15% more transaction volume, while also generating 10% higher net margin per account. Therefore, companies offering premium credit cards tend to target the mass affluent segment of the market, defined as households who have $500,000 to $1 million in investable assets. As of 2014, there is an estimated 12.8 million households with at least $500,000 in investable assets. Mercator reports that there are three primary segments that make up the premium credit card market: the mass affluent, elite travelers and high net worth consumers.

Premium credit card issuers tend to target affluent consumers who are willing to absorb the large annual fees and are willing to spend more of their credit. It is estimated that the average household income for American Express Platinum and Centurion cardholders is $741,170. While growth in mass affluent households has remained modest, there has been a significant increase in card spending at the lowest level of mass affluent segment. This has prompted premium card issuers to focus heavily on cards that target this segment of the consumer base. There is more information on the market for premium cards in a 27-page report from Mercator which must be purchased.

Age

The prevailing opinion among banks was that the market for premium credit cards was small, accounting for only 10%, but the demographics are changing as younger consumers are entering the market. Analysts in the market believe that younger people are willing to pay the steep annual fees of premium credit cards, in order to receive the generous benefits that accompany them. As of 2014, 63% of millennials did not own a credit card, but this trend is quickly changing due to the perceived status symbol associated with premium cards. In an effort to expand its consumer base, Amex has begun targeting millennials with new marketing campaigns, resulting in one third of their new customers in 2016 belong to the millennial demographic. Similarly, Chase Sapphire Reserve has acquired 1 million customers in the seven months after it was released, with half of these consumers being under the age of 35. FICO now estimates that 83% of Americans between the ages of 25 and 34 own some type of credit card.

Earlier in 2017, Citigroup updated their Citi Prestige premium credit card, which is a direct competitor with other premium cards such as the Chase Sapphire Reserve and American Express Platinum. Citi estimates that millennials account for roughly 50% of the Prestige card's customers. In order to receive the full rewards program for this card, consumers must spend at least $7,500 in the first three months. This represents a massive portion of income, as the average household income for millennial Americans aged 25 – 34 was $57,366.

Gender

After extensive research, no demographic information regarding the gender of premium credit card users has been found. However, we can make some assumptions about the gender breakdown based on available statistics.

As a whole, women reported having 23.5% more open credit card accounts than men in 2016. However, men consistently have better credit scores than women across all debt levels and all age demographics. This is likely due to the fact that 18% of women report having annual income higher than $75,000 as compared to 23% of men. The result is that men have a significantly higher credit limit, with one study indicating that the average male credit limit is $20,043 compared to $17,159 for women.

While women have more credit cards than men on average, men possess higher average incomes, credit scores and credit limits, which likely indicates that men make up a larger percentage of premium credit card users. This is due to the fact that premium credit cards are awarded to those with higher credit scores and these premium cards are accompanied by higher credit limits.

Conclusion

There is no comprehensive demographic information on premium credit card holders, but there is valuable information on some demographic breakdowns of the consumer base. The mass affluent segment of society, defined as those with $500,000-$1,000,000 in investable assets, is the most heavily targeted income group. The result is an average annual household income of $741,170 for premium cardholders. Historically, millennials have avoided credit cards, but there is a growing trend of premium cardholders between the ages of 25 and 34. American Express estimates that millennials accounted for one third of the growth in their consumer base in 2016 and CitiGroup states that roughly 50% of their Prestige cardholders are millennials. While there is no information on the gender of premium credit card users, there are some assumptions that can be made. Due to the higher average income, credit scores and credit limits of men, one can assume that men make up a higher proportion of the premium credit card market. There is more information on the market for premium cards in a 27-page report from Mercator which must be purchased.
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