Credit Card Segmentation

Credit card segmentation is a relatively new process that financial institutions and credit card companies have been using to generate more revenue and to better address the needs of customers.
 
    
Segmentation is a method used by companies to identify different groups of customers that have different needs, spending habits, or credit usages. The segmentation analysis identifies the various groups so that companies can better address the unique needs of the groups and so that their credit card products can be better targeted to certain populations of users.

In years past, financial institutions offered few credit cards with standard terms and conditions. Cardholders were limited in the types of cards available, and they were all held to the same basic standards and terms. For most customers this situation was tolerable, however there were some cardholders that found it difficult to live within these boundaries. In the recent past, credit card companies realized that if they diversified their card offerings they could better address specific needs of customers, reach new segments of the population that currently were not using credit or having difficulty obtaining credit, and ultimately generate more revenue. The first step in diversifying was to identify the needs of various groups, or segments, in need of credit.

Credit card segmentation analysis is the process used to collect data on the attributes indicative of credit card usage and to analyze the results to identify common attributes. For example, through credit card segmentation analysis, cardholders may be surveyed to identify the most frequent types of purchases made with credit cards. The number of transactions as well as the types of purchases may be collected for analysis. This information can be used to divide cardholders into groups, or segments, based on the frequency and types of purchases.

The result of credit card segmentation analysis is to develop a set of rules that can be used to place credit card accounts into segments so that all accounts within a segment have similar attributes. For example, analysis for a card issuer may shows that accounts can be divided into three segments - people who carry a balance, people who pay off the balance every month, and people who use their cards only for emergency situations. These attributes can then be maximized by the issuer so that instead of offering just one card to all three segments, the issuer can develop three different types of credit cards with terms that are more appropriate for each segment. This ultimately makes more money for the card company and better suits that needs of customers.

One of the most useful outcomes of credit card segmentation has been the development of credit card offers for people with no credit and poor credit. Analysis showed that these segments of the population were not being served by current credit card offers and that there was a need for credit cards so people could build, and re-build credit. Secured credit cards and other mechanisms were developed for people with no credit or poor credit as a means to give credit to these segments of the population.

Source: Credit Cards For People With Bad Credit Rating

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