Credit Cards Climb for a Top Spot in Home Improvement FinancingOctober 25th, 2018 by Drew Vass
Now more than ever, a recent Houzz report shows consumers are turning to credit cards when purchasing home improvement products and services. According to the study completed by Houzz Inc. and Synchrony, The Role of Credit Cards in U.S. Home Improvement, one third of homeowners used a credit card to pay for home products and services.
Houzz reveals a stunning $141 billion was charged to credit cards for home improvement products and services in 2017. 80 percent of the expenditure was on home improvement retailers, and the additional 20 percent on home improvement service providers. According to Houzz, credit card use is on the rise. In 2011, only $83.7 billion was charged to credit cards for home renovations. 2017 saw a 69 percent increase in credit card use since 2011.
The Houzz survey shows 1 in 3 customers use a credit card in home renovations. Of the 33 percent of credit card users, 21 percent combined credit with cash or other payment options. The report states that 70 percent of shoppers decided on a finance method before entering a home improvement store, with the use of credit cards at stores with unrestricted card access being twice as high as store-specific credit cards.
The report says the typical (median) homeowner used credit cards to pay $10,000 on renovations in 2017. The typical homeowner also financed 5 to 24 percent of the renovation with a loan. 62 percent of homeowners plan to pay off credit card loans over time, with store-specific cards nearly twice as likely as unrestricted cards to be paid off over time, according to the report.
“The Houzz study reinforces that the availability of financing plays an important role in consumers’ home improvement purchasing decisions,” says Courtney Gentleman, senior vice president, chief management officer payment solutions, Synchrony. “Promotional financing can offer customers an easy and convenient way to make large purchases more affordable, and it can influence where shoppers buy.”
The report shows that millennials (ages 25 to 34) are leading the board for reliance on credit cards. Millennials represent only 8 percent of the market, yet account for 41 percent of credit card usage. Buyers aged 35 to 54 account for 34 percent, and buyers 55 and older account for 30 percent.
“Aging housing stock, low inventory of homes for sale, and major demographic shifts are driving up demand for home improvements, so it is natural for consumers to look for advantageous financing methods in order to smooth out renovation spend over time,” says Nino Sitchinava, principal economist at Houzz. “Based on our study, credit cards appear to be a competitive financing method for a large share of renovating homeowners, likely explaining the recent acceleration in credit usage.”