There appears to be new things happening within the realm of credit cards – from how your credit is assessed to interest rates to credit card rewards. Depending upon your current situation, some of these trends might be positive, while others might be negative. As is usually the case, the less debt you have, the more welcome most of these changes will be for you. Let’s take a look at some of these trends.
- Credit Card Interest Rates Rising
As you probably know, the annual percentage rate (APR) you pay on credit card debt is linked to the prime rate. The Federal Reserve raised this prime rate last year and might be raising it again this year in order to help slow inflation. That’s good for any inflation concerns, but not so good for those of us who carry a credit card balance. A rise in rates means the compound interest on that balance grows at a faster rate.
The other side of the coin? Rising rates mean you’ll get more interest on your savings and investments. So… the goal should be to have no credit card debt and a nice nest egg of savings and investments. Now that would be a great trend for 2019.
- Enhanced Credit Card Rewards
Card issuers typically use sign-up bonuses to lure consumers into using their card. However, this has led to reward “hackers” applying for cards only to earn the bonus and then never using the card. This can result in losses for the issuers. So, what are they planning on doing?
Some issuers are beginning to offer smaller sign-up bonuses but focus (and increase) rewards based on card usage. One issuer has a no-annual fee credit card that offers two “Thank You” points per dollar spent at gas stations and grocery stores, plus one point per dollar on other purchases. The enhancement is that points are rounded up – so if you make a purchase of $5, you won’t get 5 points, you’ll get 10 points!
Rewards are also going to expand into dining, entertainment, Lyft and Uber rides and a lot more. This is definitely a positive trend for 2019.
- More and More “Contactless” Options
According to Investopedia, the definition of contactless payment is: a secure method for consumers to purchase products or services via debit, credit or smartcards (also known as chip cards) by using RFID technology or near-field communication (NFC). To make a contactless payment, a person simply needs to tap their card near a point-of-sale terminal – leading to the nickname “tap-and-go”.
Most in-store credit card purchases require a swipe or insertion of your card into a checkout terminal. More and more cards are becoming “contactless”. This means you can simply tap your card, use your payment-enabled phone or even your smart watch to make payments. It might seem futuristic, but it also makes life (and making purchases) a whole lot easier.
- Increse in Consumer Debt
Consumer revolving debt (primarily credit card balances) increased to $9.2 billion at the end of last year.1 As near-prime consumers come to have easier access to credit, we can expect consumer credit balances to increase as a whole. As we know, there are some people who keep their credit card spending under control and don’t go into debt and there are others who do the opposite. We can only hope that people become more financially literate in 2019 (that would be a nice trend) so they can keep their debts, and the budgets, under control.
See some of the current trends of myFICO members! Visit myFICO forums and see where their credit card experiences are taking them this year.