Starter Credit Cards Market Expected to Reach $790.3 Billion by 2032—Allied Market Research

According to a new report published by Allied Market Research, titled, “Starter Credit Cards Market, By Type (Student Credit Card, Secured Credit Card, and Unsecured Starter Credit Card), By Annual Fee (No Annual Fee Card and Low Annual Fee Card), By Provider (Banks, NBFCs, Credit Unions, and Others): Global Opportunity Analysis and Industry Forecast, 2022-2032". The starter credit cards market was valued at $293.64 billion in 2022, and is estimated to reach $790.3 billion by 2032, growing at a CAGR of 10.6% from 2023 to 2032.

Starter credit cards are entry-level credit cards designed for individuals who are new to credit or have limited credit histories. These cards typically have lower credit limits, simplified features, and require a security deposit. They help users establish a credit history, demonstrate responsible borrowing behavior, and qualify for higher-tier credit cards with better terms and rewards.

Key players in the credit card industry adopt various strategies to attract and retain customers in the starter credit cards industry, recognizing the importance of providing accessible and supportive financial products for individuals who are new to credit. For instance, in January 2024, Chase launched a brand-new card for those looking to apply for their first credit card and start building credit: the Chase Freedom Rise. This credit builder card is for those with limited or no credit history. As of the card’s launch, the Chase Freedom Rise can only be obtained by physically going to a Chase branch and filling out an application there.

Increasing emphasis on financial inclusivity and the evolving preferences of consumers drive the starter credit cards market growth. As financial institutions and governments prioritize expanding access to financial services, starter credit cards serve as essential tools for individuals with limited or no credit history to enter the credit market. This focus on inclusivity drives demand for starter credit cards, particularly among younger demographics or those with lower incomes who face barriers to accessing traditional credit products. Furthermore, the preferences of modern consumers, characterized by a preference for digital banking and convenience, contribute to the growth of the starter credit cards market. Technological advancements have facilitated streamlined application processes, instant approvals, and seamless account management, making starter credit cards more accessible and appealing to a broader audience. This technological shift caters to the preferences of the modern consumer, making it easier for financial institutions to engage with individuals seeking their best first credit card. 

The starter credit cards market also faces restraints, including the challenges associated with limited credit limits and higher fees. Moreover, stringent credit risk management practices lead to rejections for individuals with limited credit history, further hindering market expansion. On the contrary, leveraging advanced analytics and alternative data sources presents an opportunity to better assess creditworthiness and expand the market reach of starter credit cards, striking a balance between risk mitigation and inclusivity. Hence, these starter credit cards market trends contribute to the growth of the market.

On the basis of annual fee, the no annual fee card segment acquired the largest starter credit cards market share in 2022, and is expected to be the fastest growing segment during the forecast period. This is attributed to their appeal to individuals who are cautious about additional costs and are seeking budget-friendly credit options. These cards eliminate the financial burden of an annual fee, making them more accessible to individuals with limited financial resources or those who are just starting to build their credit history.

Region-wise, North America dominated the starter credit cards market in 2022. This is attributed to the region's robust financial infrastructure and widespread availability of banking services that make it conducive for the proliferation of credit card products, including those tailored for individuals with limited credit histories. Furthermore, the prevalence of digital banking and fintech innovations in North America has facilitated easier access to credit products, allowing financial institutions to reach a wider audience and offer starter credit cards with competitive terms. However, Asia-Pacific is considered to be the fastest-growing region during the forecast period. This is attributed to the region's rapidly expanding middle class and increasing urbanization that led to rising consumer demand for financial products, including credit cards, to facilitate spending and lifestyle needs.

The COVID-19 pandemic exerted a discernible impact on the starter credit cards market size, reflecting the broader economic disruptions of the global crisis. The lockdowns and economic uncertainties induced by the pandemic led to a shift in consumer behavior, with individuals becoming more conservative in their financial decisions. This caution, coupled with widespread job losses and income disruptions, resulted in a decreased appetite for credit among consumers, particularly those considering starter credit cards. Financial institutions, faced with heightened risk considerations, adjusted their lending practices, implementing stricter criteria for credit approval. The reduced demand for credit and the tightened lending environment collectively contributed to a slowdown in the starter credit cards market as both consumers and financial institutions navigated the challenges posed by the pandemic.

Key Findings of the Study

• By type, the secured credit card segment held the largest share in the starter credit cards market in 2022.
• By annual fee, the no annual fee card segment held the largest share in the starter credit cards industry in 2022.
• By provider, the NBFCs segment is expected to show the fastest market growth during the starter credit cards market forecast period.
• Region-wise, North America held the largest market share in 2022. However, Asia-Pacific is expected to witness the highest CAGR during the forecast period.

The key players operating in the starter credit cards market analysis include Discover Bank, American Express Company, Capital One, Deserve, Credit One Bank, N.A., Citigroup Inc., Bank of America Corporation, JPMorgan Chase & Co., U.S. Bank, and OpenSky. These players have adopted various strategies to increase their market penetration and strengthen their position in the industry.