My Credit Card Industry Outlook – What To Expect For The Rest of 2013 and Beyond
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I recently met with several different prominent credit card issuers and I frequently have contact with industry insiders, so I thought I’d pull together my general thoughts from these meetings and what I expect to happen for the second half of 2013 in terms of sign-up bonuses and other new developments.
In general, I see the credit card industry heating up and that has already been seen with great credit card bonuses like the recent limited-time offers of 75,000 Membership Rewards points for the Business Rewards Gold card from American Express and this week’s limited-time offers of 60,000 Ultimate Rewards points on the Chase Ink Bold and Ink Plus cards.
Like many other sectors of the economy, the credit card markets are heating up as consumers and businesses start spending again, and while we didn’t see too many jaw-dropping bonus offers in the second half of 2012, by contrast, I expect to see some great offers in the second half of this year.
More Attention On Business Credit Cards
As the economy improves, more and more people are starting their own ventures – either outright or as a side business, and many credit card companies are picking up on this and beginning to make the bonus offers on their lines of business credit cards more and more attractive. Starting a business involves spending money, and the banks want that business. They realize that these are the high-value customers and that there is a lot of competition for their spending, so they are going to be offering better and better sign-up and spending bonuses and more attractive perks and benefits to entice them.
Just note that business cards are not regulated by the Credit CARD Act of 2009 and generally have fewer protections and higher fees. However, they also have some of the highest sign-up bonuses and category spending bonuses like the Ink cards’ 5X on office supplies and telecommunications and 2X on hotels and gas; the Business Gold Rewards card’s 3x points on airfare, 2x points on purchases in the U.S. for advertising in select media, gasoline at U.S. stand-alone gas stations, and shipping; and the Capital One Spark Miles Business and Capital One Spark Miles Cash cards’ 2X points per $1 on all purchases. The great thing is most issuers will issue pretty much any small business- even if a brand new idea or side consulting project, by allowing consumers to apply and use their Social Security Number in lieu of an Employee ID Number (EIN) as sole proprietorships. Note: the credit card companies are all very keen on bringing in actual small businesses so I wouldn’t be surprised to see these rules tighten in the future as they raise the threshold of what type of business qualifies for these lucrative offers.
More Limited Time Offers
Limited-time sign-up offers are not exactly new – many of the best credit card offers that periodically come around like 100,000 Avios for the British Airways Visa or 30,000 points for the Starwood Preferred Guest Amex stick around for a couple months, but what is new is that many credit card companies are offering truly limited-time offers – sometimes only a week, a day or even several hours on truly lucrative points bonuses like January’s 100,000-point offer on the Amex Platinum card.
And consumers have been responding since they know that these offers are historically high and won’t be around for long. They have gotten in the habit of applying immediately and credit card companies have noted how extremely effective these offers are at driving new customers and account openings. I have no doubt that we will be seeing more and more (and hopefully higher!) LTO’s for the rest of the year.
More Spend Threshold Bonuses and Benefits
As credit card companies start attracting new consumers, their second challenge is keeping them engaged and getting them to put more of their spend on these cards. One way to to so is to add category spending bonuses like the Ink cards’ 5X on office supplies, and spending threshold bonuses like the British Airways Visa’s “Travel Together” companion ticket when you spend $30,000 on the card in a calendar year.
I applaud this because it is a win/win- more spend is brought into the issuer, and the consumer benefits from more perks. While bonus categories are nice, I’d rather see more general spending thresholds (like how you can spend $30,000 on the Amex Premier Rewards Gold and get a 15,000-point bonus) because keeping track of so many categories on so many cards is becoming a chore and I like cards that give bonuses on everyday spend (like Chase Freedom Exclusives 10% on all purchases).
Issuers are also looking beyond sign-up bonuses and spending to improve the products they’re offering. For example, the United Explorer card recently removed foreign transaction fees, and I see that as a trend and hope that American Express lifts these annoying fees on both its Starwood business and personal cards, and the Business Rewards Gold. After all, how can they promote these cards as travel products when they have penalties for using them abroad?
Focus on Gaming
While it is still easy to rack up lots of points and miles on credit cards periodically, and banks are willing to issue multiple rewards cards to the same consumers (some more willing than others), almost every bank I have spoken with recently has stressed that they don’t want a lot of new customers, they want the right customers. This is similar to the recent revenue requirements that Delta and United have implemented to weed out the “cheap elites”- those who derive a lot of value from the elite program and do so on the cheapest/mistake fares and by using backdoor methods like constantly status matching/challenging, but never bringing new business.
That said, if you are interested in getting in on the best credit card offers, you need to take a more comprehensive view of your finances and banking. I would recommend being as good a customer as possible and not blatantly opening cards and closing them right away simply for the bonuses since banks will most certainly start to react negatively to you as a customer. Chase axed a lot of cardholders who abused a 5% rebate perk on the AARP and American Express now conducts financial reviews of customers that they identify might be misuing or abusing card benefits (or misstating information on their applications).
Keep your cards open, spend on them when not just trying to get a bonus or max out a spend category. While this may not seem like “maximizing” at the time, you need to think long-term. All rates being equal, think about getting checking accounts from the key issuers like Chase and consider them for auto/home loans, etc. The more diverse and profitable you are as a customer, the better chance of staying in a bank’s good graces.
While competition is heating up amongst the credit issuers, all are stressing compliance to credit card terms as a top priority. That means that as a blogger, I need to ensure that every piece of information I pass along about a credit card as an affiliate is accurate. This can be tricky with numerous offers that constantly change, but times are changing and with the Consumer Financial Protection Bureau out and about putting every bank and credit card issuer under a magnifying glass, it is critical that all offers need to be legitimate.
I’ve spoken with other bloggers and we are all working to come up with solutions that are “compliant” while still delivering the deals our readers demand. I still commit to posting the top deals on my Top Deals page and I absolutely still cover deals that are not my affiliate links, but regardless, there is still a lot of concern over the right deals being promoted at the right times and that you, my readers, will be getting the best possible offers at all times.
On the consumer side, this could be a good thing because in the past people have applied for offers and not gotten bonuses or other terms fulfilled because those offers were not legitimate at the time of application even though the application pages were still up. I believe it is the responsibility of banks to make sure their offers are compliant across all channels, and in fact, banks are liable for lawsuits if that happens, so they want to make sure that if you apply and are eligible, you get the points. I foresee issuers following Amex’s lead and post the exact criteria for getting a signup bonus – like you must not have had XYZ cards in the last x year(s) – in order to avoid these problems in the future.
Overall, I have a very positive outlook on the future of rewards credit cards and bonuses, especially as we enter the second half of 2013. However, as credit card companies give more, they’ll want to take more as well and as always, you shouldn’t get into this game if you can’t manage yourself financially, since making mistakes (like late payments) means getting hit with lots of fees that wipe out the value of your points.
If your credit score isn’t in great shape and you’ve been on the sidelines, I’d recommend now more than ever to try to rehabilitate your credit and get your score up so you can get in on all the action that is coming our way. Ideally you want to be over a 700 with FICO, but I know readers who have gotten approved for premium cards in the mid/high 600’s.
For your reference, here are links to posts on understanding credit, educating yourself and getting in on the best deals:
When To Cancel A Credit Card
Do I Need To Have A Business To Get A Business Credit Card?
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