In the UK, John Lewis, Tesco Bank, and M&S Bank are the best brands at retaining credit card customers beyond 12 months, due to their interest-free periods, competitive rewards, and lower APRs.
GlobalData’s 2019 Banking and Payments Survey found that 81% of survey respondents in the UK with a John Lewis credit card are unlikely to switch their main credit card provider in the next year, the highest rate among all UK providers. Similarly high proportions of respondents that use Tesco Bank (73%) and M&S Bank (71%) are also unlikely to switch. The percentages for these three retailers were significantly better than the 56% average across the entire survey.
There are several reasons for this. In particular, all three retailers provide a rewards program linked to their own retail business: the retailer sends the credit card user a number of vouchers, which can be spent on any of its products either online or in store. The trio also offers lower APRs than many banks: John Lewis charges 18.9% per annum, while Tesco Bank and M&S Bank charge 19.9%. In contrast, many high street banks charge higher APRs for their reward cards, such as Barclays (22.9%) and HSBC (21.9%).
Asda Money and Aqua are at the other end of the scale when it comes to both APRs and the likelihood of customer switching. A high proportion of survey respondents that use Asda Money (55.3%) or Aqua (47.7%) as their main credit card provider are likely to switch in the next 12 months. Aqua charges its credit card customers an APR of 35.9%, a potential driver of its poor customer retention figures, while its lack of rewards on offer could be another factor.
The high likelihood of switching may also be related to both Asda Money’s and Aqua’s target customers. More specifically, Asda Money typically targets the mass market while Aqua targets those on low incomes and who are at high risk. This means they cannot afford the lower APRs and increased rewards that the top brands provide.
Overall, while there is plenty of potential for Asda Money and Aqua to encourage increased credit card customer loyalty beyond 12 months, it is imperative that these providers consider their customer bases when trying to convince customers to switch. More precisely, while Aqua charges high APRs to compensate for its high-risk customer base, it could offer a flexible APR that decreases as customers’ creditworthiness improves, giving them a reason to stick with their account over time.