Table of Contents
Issues in the Market
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- Key issues
- Abbreviations
Future Opportunities
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- The rise of the debt card and fall of the credit card
- Plastic cards for pensioners
- Plenty of room to expand card use for smaller value transactions
- Death of Plastic…
- …but not of security concerns
Market in Brief
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- Debit card growth negates fall in the number of credit cards in issue
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- Figure 1: Number of payment cards in issue, by type, 2003-08
- Credit cards mainly a source of revolving credit
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- Figure 2: Gross and net credit card lending, 2004-09 (not seasonally adjusted)
- Visa dominates debit cards while MasterCard controls credit cards
- Plastic card transaction values rising ahead of volumes
- Credit and debit card spending behaviour
- Spending will be depressed as consumers focus on debt repayment
- APRs rise along with lending criteria and fraudulent activity
- Market share – Lloyds Banking Group takes control
- Adspend on plastic cards declines
- Branch network still important in distribution but future online
- Key consumer research findings
- Type of credit held
- Debit card usage
- Credit card usage
- Consumers and type of issuer
Internal Market Environment
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- Key points
- APRs continue to rise along with lending criteria
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- Figure 3: Official end-of-month bank rate and monthly bank and building society overdraft and credit card interest rates, January 2002-June 2009
- Shrunken target market increases competition for new business
- Faster Payments Service introduced in May 2008
- Value of plastic card fraud hits £596 million in 2008
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- Figure 4: Value of fraudulent transactions, by card type, 2002-08
- Identity theft continues to be a problem
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- Figure 5: Number of reported cases of identity theft, 2000-08
- 32% rise in credit card complaints to the Ombudsman
- Changing regulatory landscape
- OFT to conduct an investigation into consumer credit
- FSA to tighten control of retail banking activities
- New FSA rules replacing the Banking Code
- Government White paper aims to curb irresponsible lending
- The Payment Service Directive
- Consumer Credit Directive
- E-Money Directive
- Interchange investigations
Broader Market Environment
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- Key points
- Economic conditions likely to hinder spending
- Consumer confidence rising from the depths but still low
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- Figure 6: Monthly consumer confidence index, June 1988-June 2009
- Expected financial activity focuses mostly on debt repayment
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- Figure 7: Savings, investment, borrowing and debt repayment – consumers’ expected activity, quarterly indices, 2002-09 (Q2)
- Unemployment – 7.2% and rising?
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- Figure 8: Working age unemployment rate, seasonally adjusted, year to March 2004-09
- Fall in inflation and interest rates has eased pressure on budgets…
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- Figure 9: Monthly changes in the rate of annual inflation* and Bank of England base rate – UK, June 2002-June 2009
- Increasing internet penetration good for the plastic card industry
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- Figure 10: British internet penetration at home/work/place of study or elsewhere, April 2002-January 2009
Competitive Context
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- Key points
- Decline of the cheque
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- Figure 11: Volume of cheque* and plastic card** and automated payment^ transactions, millions, 2002-18
- Store card market shrinking as retailers issue own-brand credit cards
- Total borrowing on overdrafts hits £10 billion in 2008
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- Figure 12: Total borrowing on overdrafts, 2003-08
- A sharp decline in unsecured personal loans
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- Figure 13: Gross and net consumer credit (excluding credit card lending), June 2004-April 2009 (not seasonally adjusted)
SWOT Analysis
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- Figure 14: Credit and debit card SWOT analysis, July 2009
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Who’s Innovating?
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- Key points
- Emue – a card with a built-in one-time password generator
- O2 trials mobile wallet technology concept
- Orange and Barclaycard also partner up for mobile payments technology
- iPhone Credit Card Terminal
- Citi experiments with Facebook and MySpace to generate new business
- Google looking into credit score-based targeted advertising
- Virtual prepaid cards have failed to gain widespread appeal
- ‘Dual marketing messages’ – advertising to teens and parents
- Discover ‘Current’ card giving parents more control over teen spending
- Marks & Spencer Premium Club to increase in-store shopping
- Lloyds debit card holders can use ‘spare change’ to build up savings
- Prepaid travel cards for overseas spending
Trade Perspective
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- Impact of the recession
- More focus on retention
- Changing regulatory environment
- Debit vs. credit card usage
- Overseas credit and debit card usage
- Cashless society – still some way off
- Prospects for innovation
Market Size and Forecast
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- Key points
- Credit card debt falls from its mid-2000s peak
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- Figure 15: Outstanding credit card balances, not seasonally adjusted, 2004-09
- Credit cards mainly used as revolving credit
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- Figure 16: Gross and net credit card lending, 2004-09 (not seasonally adjusted)
- Most pay off their balances in full each month
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- Figure 17: Trends in how balance settled for credit card, 2004-08
- Debit card growth negates fall in the number of credit cards in issue
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- Figure 18: Number of payment cards in issue, by type, 2002-08
- Multiple credit card ownership on the decline
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- Figure 19: Trends in number of credit cards held, 2004-08
- Debit cards responsible for 73% of transaction volumes
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- Figure 20: Volume of UK purchases, by card type, 2002-08
- Value of purchases on debit and charge cards continues to rise
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- Figure 21: Value of UK purchases, by card type, 2002-08
- Average purchase values highest for charge cards
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- Figure 22: Average purchase value in the UK, by card type, 2002-08
- Debit cards most frequently used type of card
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- Figure 23: Card usage frequency for purchases in the UK, by card type, 2002-08
- Forecast
- Credit Cards – will be used less frequently but for higher value purchases
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- Figure 24: Forecast of credit cards: Total value and volume of purchases, 2004-14
- Debit Cards – average purchase value likely to fall over time
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- Figure 25: Forecast of debit cards: Total value and volume of purchases, 2004-14
- Factors used in the forecast
Segment Performance
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- Key points
- Debit cards
- Visa dominates UK debit card market
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- Figure 26: Debit cards in issue, by scheme, 2002-08
- Visa debit card represents over half of all transaction volumes
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- Figure 27: Debit card transaction volumes, by scheme, 2002-08
- Transaction values rising slightly ahead of volume
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- Figure 28: Debit card transaction value, by scheme, 2002-08
- Average transaction values around £50
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- Figure 29: Debit card average transaction values, by scheme, 2002-08
- Cash acquisition on the rise
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- Figure 30: Debit card cash acquisition, by scheme, 2002-08
- Credit and charge cards
- MasterCard taking over where Visa took off
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- Figure 31: Credit and charge cards in issue, by scheme, 2002-08
- Overall transaction volumes relatively flat
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- Figure 32: Credit and charge card transaction volumes, by scheme, 2002-08
- Purchase volumes also stagnate
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- Figure 33: Credit and charge card purchase volumes, by scheme, 2002-08
- Value of credit and charge card purchases continues to rise
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- Figure 34: Credit and charge card purchase values, by scheme, 2002-08
- Average purchase values considerably higher for ‘other’ issuers
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- Figure 35: Average credit and charge card purchase values, by scheme, 2002-08
- Cash acquisition on credit and charge cards decreasing
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- Figure 36: Credit and charge card cash acquisition volumes, by scheme, 2002-08
- Figure 37: Credit and charge card cash acquisition value, by scheme, 2002-08
Spending Behaviour
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- Key points
- Highest purchase volumes on food and drink
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- Figure 38: Credit and debit card purchase* volumes millions, by sector, 2008
- Consumers spend twice as much on debit cards
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- Figure 39: Credit and debit card purchase* values £ millions, by sector, 2008
- Average value of purchases falling in most categories
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- Figure 40: Average value of purchases*, by sector, 2003-08
- Overseas – credit cards are still favoured
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- Figure 41: Summary of credit and debit card transactions outside the UK, annual transaction value and volume, 2008
Market Share
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- Key points
- Debit cards
- Lloyds Banking Group leads the current account market
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- Figure 42: Main or primary current account providers, by main banking groups, March 2009
- Credit cards
- Lloyds Banking Group grabs top spot from Barclays with HBOS takeover
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- Figure 43: Credit card provider market share, by brand, April 2009
Companies and Products
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- Major players
- American Express
- Barclays/Barclaycard
- Capital One
- HSBC
- Lloyds Banking Group
- Marks & Spencer Money
- MBNA
- Royal Bank of Scotland
- Other recent company news
- O2 to launch 02 Money
- Nationwide introduces new overseas use charges
- Egg launches mass-market credit card with a monthly fee
- Tesco plans further activity in financial services
Brand Communication and Promotion
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- Key points
- Plastic card adspend down by a fifth in 2008
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- Figure 44: Plastic card adspend, by category, 2006-08
- 69% of advertising done via direct mail
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- Figure 45: Plastic card adspend, by media type, 2006-08
- Most major plastic card providers have cut adspend
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- Figure 46: Top ten plastic card adspend companies, 2006-08
- Average monthly adspend peaks at the start and end of the year
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- Figure 47: Adspend seasonality based on average monthly adspend, 2006-08
Brand Elements
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- Key points
- Brand map
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- Figure 48: Attitudes towards and usage of credit and debit card brands, May 2009
- Brand qualities of credit and debit card brands
- Banks most competent, but Virgin most vibrant
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- Figure 49: Personalities of various credit and debit card brands, May 2009
- Experience of credit and debit card brands
- Barclaycard most used, but Capital One losing custom?
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- Figure 50: Consumer usage of various credit and debit card brands, May 2009
- Brand intentions for credit and debit card brands
- Virgin Money most considered, but credit appetite suppressed
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- Figure 51: Consideration of various credit and debit card brands, May 2009
- Brand satisfaction for credit and debit card brands
- Tesco has best customer endorsement
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- Figure 52: Satisfaction with various credit and debit card brands, May 2009
- Brand commitment to credit and debit card brands
- Lloyds TSB has top commitment
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- Figure 53: Commitment to various credit and debit card brands, May 2009
- Barclaycard
- What the consumer thinks
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- Figure 54: Attitudes towards the Barclaycard brand, May 2009
- Capital One
- What the consumer thinks
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- Figure 55: Attitudes towards the Capital One brand, May 2009
- Lloyds TSB
- What the consumer thinks
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- Figure 56: Attitudes towards the Lloyds TSB brand, May 2009
- American Express
- What the consumer thinks
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- Figure 57: Attitudes towards the American Express brand, May 2009
- Tesco
- What the consumer thinks
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- Figure 58: Attitudes towards the Tesco brand, May 2009
Channels to Market
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- Key points
- Over a quarter of consumers apply for credit cards in a branch
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- Figure 59: How consumers applied for credit cards, 2008
- 70% of internet users have opened a credit card online…
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- Figure 60: Method used to switch/open new account, by product type, April 2008
- …but debit cards are more likely to be obtained via the branch network
- The future of distribution is online
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- Figure 61: Online purchasing behaviour for current accounts and credit cards, September 2008
The Consumer – Type of Credit Held
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- Key points
- Two in five borrowing using unsecured debt
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- Figure 62: Forms of credit held with outstanding balances, 2008 and 2009
- Some have debt from multiple sources
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- Figure 63: Cross-ownership of types of outstanding credit, April 2009
- Middle-aged and more affluent most likely to have consumer debt
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- Figure 64: Outstanding credit held, by gender, age and socio-economic group, April 2009
- Young and less affluent lack access to most forms of consumer credit
The Consumer – Credit Card Brand Share
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- Key points
- Barclaycard and Lloyds TSB vie for top spot
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- Figure 65: Credit card ownership and provider share, April 2009
- Nearly one in eight hold a credit card with one of the big four banks
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- Figure 66: Credit card providers, April 2009
- Retailers a hit with the ladies while men prefer direct providers
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- Figure 67: Provider share, by gender and age, April 2009
- Wealthy spread their business among multiple providers
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- Figure 68: Provider share, by socio-economic group and gross annual household income, April 2009
- Internet users going direct
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- Figure 69: Provider share, by technology users, internet usage frequency and web use, April 2009
The Consumer – Debit Card Usage
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- Key points
- Still plenty of scope to expand debit card usage
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- Figure 70: Statements on debit card, April 2009
- Younger consumers will drive growth in lower-value transactions
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- Figure 71: Most popular statements on debit card, by demographics, April 2009
- Less affluent present opportunities to expand debit card usage further
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- Figure 72: Most popular statements on debit card, by demographics, April 2009
- Debit cards, media and technology
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- Figure 73: Most popular statements on debit card, by demographics, April 2009
The Consumer – Credit Card Usage
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- Key points
- Over half happy with their credit cards…
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- Figure 74: Credit card attitude and behaviour statements, April 2009
- …but little interest in added benefits
- Retailer issuers benefiting from backlash against traditional providers
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- Figure 75: Credit card attitude and behaviour statements, by credit card provider, April 2009
- 25-44-year-olds show greatest level of engagement
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- Figure 76: Credit card attitude and behaviour statements, by demographics, April 2009
- Wealthy show most interest in rewards and balance transfers
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- Figure 77: Credit card attitude and behaviour statements, by demographics, April 2009
- Media, technology and credit card usage
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- Figure 78: Credit card attitude and behaviour statements, by demographics, April 2009
The Consumer – Targeting Opportunities
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- Key points
- Key Target Groups
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- Figure 79: Credit card attitudinal groups, april 2009
- Passively Content
- Rate Tarts
- APR and Safety
- Seeking Rewards
- Seven in ten Rate Tarts have an outstanding balance on their credit card
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- Figure 80: Forms of credit with an outstanding balance, by target groups, April 2009
- Passively Content sticking with the high street banks
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- Figure 81: Credit card providers, by target groups, April 2009
- Rate tarts concentrated among the 25 to 54s
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- Figure 82: Target groups, by demographics, April 2009
- Seeking Rewards populated by the wealthy
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- Figure 83: Target groups, by demographics, April 2009
- Key target groups and media and technology usage
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- Figure 84: Target groups, by demographics, April 2009
Appendix – The Consumer – Types of Credit Held
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- Figure 85: Most popular money currently owed, by demographics, April 2009
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- Figure 86: Next most popular money currently owed, by demographics, April 2009 (continued)
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Appendix – The Consumer – Brand Share
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- Figure 87: Provider share, by demographics, April 2009
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Appendix – The Consumer – Debit Card Usage
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- Figure 88: Most popular statements on debit card, by demographics, April 2009
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Appendix – The Consumer – Credit Card Usage
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- Figure 89: Most popular statements on credit cards, by demographics, April 2009
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- Figure 90: Next most popular statements on credit card, by demographics, April 2009 (continued)
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