The 2007 study is the first such study to combine consumer credit risk characteristics with consumers' choices of all payment options, including cash, check, credit cards, debit cards, electronic payments and new online payment technologies. The study provides a "window" into the U.S. consumer's wallet, coupled with an examination of their credit risk profiles. It was conducted to help payment providers better understand how consumers prefer paying for goods and services and to provide predictive modeling solutions to improve targeting and profitability across their product portfolio.

The 2007 study revealed that more consumers prefer debit cards than any other type of payment for point of sale purchases. This is the first time in the study's history that debit cards exceeded all other payment devices as the overall preferred payment product. Twenty-nine percent of respondents prefer debit cards versus 26 percent for credit cards.

Additionally, consumers appear to be conscientiously and actively managing the payment devices they already own and use. This year's study shows fewer consumers are adding payment products to their wallets, and more consumers are eliminating products from their wallets than in prior years' studies. Only 31 percent of respondents added a new payment device to their wallet this past year versus 56 percent in 2004, while 20 percent of consumers said they shed payment products compared to 16 percent in 2004. However, when adding payment options, pricing factors are the primary driver of choice, followed by rewards programs, particularly among the prime and super prime risk segments.

"Our study showed that Rewards credit cards represent 50 percent of all preferred credit cards today with 83 percent of Rewards card owners using their Reward credit card," says Beth Costa, director, Edgar, Dunn & Company. "We see that consumers are using more proprietary Rewards credit card products, and this shift has seemingly come at the expense of Cobranded credit cards (i.e., credit cards branded with both a bank and a non-bank sponsor, and offering a rewards program)."

Other insights into consumers' wallet preferences include:

• Proprietary Rewards credit cards have gained in ownership, usage, and preference over Cobrand and Affinity credit cards. Moreover, 80 percent of Reward cardholders are of the highest quality in terms of overall credit risk.
• There are significant differences in wallet usage and position across consumer risk segments and this behavior changes as overall risk migrates lower and higher between sub-prime and super-prime risk segments. Furthermore, more than 50 percent of those consumers who prefer cash, check, and debit cards are in the prime and super prime categories, suggesting that preference is driven by choice and not lack of access to credit.
• For the first time, a Relationship Rewards program connected with the consumer's primary financial institution is a greater incentive than a reduction of interest rates when acquiring a new credit card from that institution. Thirty-five percent of respondents indicated that Relationship Rewards is the leading incentive to acquire a new credit card from their primary financial institution (up from 31 percent in 2004).
• Fifty-five percent of respondents said they owned a person-to-person account, (e.g., PayPal), while 10 percent reported active use.

"Payment providers are mailing billions of pre-approved offers each year to an increasingly educated audience in an effort to maintain share of wallet in a mature, saturated and cluttered marketplace," said Tim Claytor, director of Market Intelligence for TransUnion. "The credit-active adult consumer is much more complex than demographics or credit attributes alone can adequately explain beyond life stage and overall risk assessment. To proactively address this issue, the PaymentDynamics study combines powerful data with modeling and analytics to provide a better roadmap for predicting behavior and understanding attitudes that influence their payment choices."