Financing Home Improvement with Credit Card
Consumer Credit Card Spend for Home Improvement on the Rise, Houzz-Synchrony Study Finds
Highest usage among millennials; Uptake of promotional financing
One-third of homeowners used a credit card to pay for home renovations in 2017, according to a study released today by Houzz, Inc., in collaboration with Synchrony (NYSE:SYF), on the role of credit cards in home improvement financing. Consumers charged $141 billion in home improvement product and service purchases to their credit cards in 2017, a 69 percent increase from 2011 ($84 billion).1 During 2016 and 2017, consumer credit spend grew at near double the pace of the overall growth of the home improvement market, driving deeper market penetration.
Renovating homeowners using credit card financing report a median spend of $10,000, with between $1,500 and $4,800 charged to a card. Reliance on credit cards remains high even in larger renovations, with 28 percent of homeowners who spent $50,000 or more on their projects paying for at least part of those renovations with credit cards. Millennial homeowners (aged 25 to 34) were the most likely to use credit cards to finance renovations (41 percent), followed by Gen-Xers between the ages of 35 and 54, and Baby Boomers 55 years of age and older (34 and 30 percent, respectively).
“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,” said 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.”
Three in five credit card users plan to pay off their balances over time (62 percent), of which, a third plan to pay off credit cards within two and 11 months of purchase (33 percent). Younger generations are more likely to revolve balances (65 and 60 percent of Millennials and Gen-Xers, respectively) than are Baby Boomers (49 percent).
Among those who planned to pay off their balances over time, renovating homeowners were three times more likely to leverage no-interest or low-interest promotions than standard interest rates (74 versus 25 percent), and cited the low cost as the leading motivation for card usage (44 percent). Promotional no-interest financing was popular across renovation projects of all sizes and among homeowners of all ages.
“The Houzz study reinforces that the availability of financing plays an important role in consumers’ home improvement purchasing decisions,” said Courtney Gentleman, SVP, CMO 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.”
Significantly, half of renovating homeowners used cash and no other form of secured or unsecured financing (54 percent). One in five admit to giving credit cards at least some consideration (18 percent), with 27 percent choosing not to use cards due to perceived high costs. Yet, among those considering a credit card, 37 percent would have used a different financing option, if it were available.