Credit cards have been used by consumers for over 50 years, and as you might expect, they way they’ve been issued, regulated, and used by consumers has gone through several changes through those years. They began as a simple convenience, but these small, flat rectangles of plastic and the credit exchange they represent have evolved into a behemoth of an industry. And, with fewer people carrying cash these days, tools like Square and PayPal turning any ordinary citizen into a credit-accepting merchant, and just about every place of business accepting plastic as easily as hard currency, there’s really no reason for the credit industry to slow down.
Currently, though, credit cards have landed American consumers in a bit of a worrisome position. According to the Federal Reserve’s Consumer Credit Report released in November of 2016, Americans collectively hold almost $1 trillion USD in credit card debt — an enormous hole from which to dig out. Still, credit cards are how money is moved in our country, with nearly 30 billion (with a b!) credit card transactions in 2016.
The current trends in consumer behavior, combined with new technology, new credit concerns, and the hand of the government, are bringing about some interesting changes. What can we expect to see in the credit card market in 2017? Based on the trends we’ve seen, here are ten predictions.
1. A small bump in interest rates.
Many financial experts agree that the Federal Reserve is going to bring interest rates slightly higher in 2017. A small raise of 0.25% was already enacted in mid December of 2016, but look for another small raise before 2017 is even halfway through. What does this mean for you? Well, if you have just a little bit of credit card debt, or none at all, then it probably doesn’t mean much. However, if you’ve got a substantial amount of credit card debt (say, more than $10,000), you’ll likely end up paying more because your APR, or annual percentage rate, will go up. The best way to safeguard against even the smallest interest rate hike, of course, is to pay off your debt.
2. More merchants accepting mobile and NFC payments.
It’s only a matter of time before this credit card convenience becomes the norm, and we think 2017 is the year that mobile and NFC, or near field communication, payments take off. These allow you to pay for items just by tapping your smartphone or wearable on a reader. It’s a payment technology that’s often used for small purchases, like a latte or a grab and go lunch. Consumers love it because of the convenience of not having to carry a wallet, and merchants love it because consumers tend to spend more when they use credit, plus it keeps payment queues moving well.
3. Chips everywhere.
You’ve probably noticed that newer credit cards are embedded with a chip, and that instead of swiping these cards, you simply slide it into a card reader for processing. It’s a small change in behavior, but it’s a big change in terms of security, since the chip encrypts all of the information necessary for processing a transaction, whereas the magnetic stripe does not. Look for more and more merchants to become set up with chip readers, and look for your expired credit cards to be replaced with new chip enabled cards.
4. Obtaining a credit card may become easier.
For a while, anyone could get a credit card with a high limit, regardless of his or her credit history or score. Then, for the past five or ten years, getting credit became harder as card issues took a more conservative approach toward managing their risk with consumers. However, if you’ve got a low credit score and want to bring it back up, you may find that getting a credit card is a bit easier in 2017 than it has been in the past few years. You’ll probably need to start with a secured card, though, or a card for which you put up the money in advance. It’s like a debit card, but a secured credit card can actually help you rebuild your credit score and make it easier to get actual credit sooner rather than later.
5. More cardholders will be able to obtain their FICO scores for free.
Thanks to some recent changes in how FICO scores can be obtained and shared, some credit card companies now allow their cardholders to see their FICO score for free, any time. It may not seem like a big deal, but knowing your FICO score is incredibly useful if you’re about to apply for a loan or mortgage. In 2017, we predict that even more credit card companies will offer this perk to its customers. If you’re applying for a new card, look to see if seeing your FICO score free is one of the benefits.
6. More cash back rewards, fewer miles and luxury hotel points.
The average US consumer is a bit strapped for cash these days. Those credit card miles and points toward stays in upscale hotels — those are nice and all, but they’re just not as practical for most middle class credit card users because they’re not flying or staying in hotels very often. What’s valuable to this demographic? Cash — any way they can get it. To lure in more customers, credit card issuers will probably move toward more cash back programs. That’s what people want: not gifts, not miles, not points — just cash.
7. Companies will push hard to attract young new customers.
For a while, credit card companies were looking to sign Millennials up as new customers. Now, they’re looking to get Generation Z on board. This is the post-Millennial generation, and they’re either in college or just finishing up — the perfect age to begin their loyalty to a credit card.
8. More loyalty programs.
Speaking of loyalty, credit card companies know that they’ve got stiff competition out there. In order to keep customers, they’ve got to make it worthwhile. Enter loyalty programs, often tied in with other companies, to make you feel like you’re getting more than just a way to not carry cash around. They mostly operate on a points system, and you can expect to see more and more loyalty programs as the year progresses. Look for things like exclusive offers from partners, ability to advance to some sort of elite ranking, and desirable rewards.
9. Better bonuses for new credit card holders.
As part of the loyalty programs discussed in prediction eight, sign up bonuses will probably swell in 2017. In order to bring in new customers, credit card companies will likely offer a huge points bonus just for signing on. This initial bonus windfall helps customers get rewards and higher status sooner, and it doesn’t really cost the credit card companies anything, making it desirable for both parties.
10. Credit card debt will exceed $1 trillion.
Not a hard call to make, given that it’s close to the $1 trillion mark now, and that the trend has been more debt. Still, it’s a startling figure and a milestone one at that. Credit card payments seem to be getting lower, consumers are spending more, and according to NerdWallet, the average US household has just over $16,000 in credit card debt. If you’ve got some credit card debt, consider making 2017 the year you get your finances in order and take steps to pay it down.