• by Tanya Gazdik , October 8, 2007

Some examples of possible programs could be credit card companies partnering with life insurance companies. Increases in life insurance coverage could be offered as part of a credit card reward program, he suggests. The African-American market--projected to wield a buying power of $981 billion by 2010--has not been cultivated by most financial service providers, according to a new report.

The group not only holds fewer credit cards than any other major racial or ethnic group, but it also uses them far less often--leaving significant room for growth, according to "African American Credit, Debit and Prepaid Card Users: Undervalued and Overlooked," a new report from Packaged Facts.

There remains feverish interest in the growing Hispanic population, while overlooking the fact that incomes of African-Americans continue to outpace those of Hispanics. This presents a tremendous opportunity for financial service organizations in terms of both attracting more cardholders and persuading them to increase the frequency of use, according to Luis Clemens, the author of the report.

Current credit card usage among the two groups is about the same. And unlike the Hispanic market, there is no potential language barrier with African-Americans, he notes.

"In the process of marketing to one attractive group, they have overlooked another very attractive group," says Clemens, who is currently the editor of La Politica.

Currently, more than two million African-American households have incomes of $75,000. Packaged Facts estimates that the aggregate income of affluent black households--those bringing in $100,000 or more per year--has already reached $116 billion. Yet only 45% of adult blacks in the U.S. had or used credit cards in the fall of 2006, accounting for just 7% of the total adult credit card user population, and the African-American debit card use rate scored below the general population's rate.

American Express is one example of a company that has done a good job focusing on the African-American market, especially the top-of-the-line segment with a household income of more than $200,000. "This is a growing segment of the African-American population, and there is definitely not as high [a rate] of credit cards use as with whites earning the same income," Clemens says.

One thing marketers can do to make credit card offers more appealing is to link them to financial services already frequently used by the African-American market, he says. Life insurance is the most highly prized financial service, while student loans are more highly utilized by African-Americans than by other groups.

Some examples of possible programs could be credit card companies partnering with life insurance companies. Increases in life insurance coverage could be offered as part of a credit card reward program, he suggests. With student loans, Bank of America has a "keep the change" program. Something similar could be done with a credit card to route the extra "change" to help pay down on the loans.

African-Americans typically value good financial advice more than other groups, are more likely to read the business section of the newspaper, and are more receptive to financial services advertising, Clemens notes.

Yet, there is definitely a lack of specific brand advertising, the report shows. "There are important opportunities to be had in print outlets," he says. "Considering that [the African-American market is] often citing a need for additional information about financial services, it seems to me that personal finance columns/section in any number of outlets are natural venues for sponsorship."