6 Predictions for Credit Cards in 2018
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There's been no shortage of news in the credit card industry over the past year: new Amazon and Uber offerings, enhanced bonus opportunities for Marriott lovers, access to VIP events and much more. As cardholders look ahead to 2018, what's on the horizon? Consider these predictions for the plastic in your wallet for the new year.
1. Big bonus opportunities will still be available.
Here's some news that will give all TPG readers a reason to smile: 2018 will bring a new wave of tempting offers to open new cards. Greg McBride, CFA, chief financial analyst at Bankrate.com, said that banks are looking to add frequent business travelers who have the excellent credit required for premium cards to their customer bases.
“The competition among card issuers is intense and will continue to be for the foreseeable future,” McBride told me in a recent interview. “The high-volume spenders with little risk of default are in demand across the financial industry. You’ll continue to see innovation in card products to attract that audience.”
McBride said he’s not sure if the magnitude of sign-up bonuses such as the (now-expired) 100,000-point Chase Sapphire Reserve offer that sent cardholders into a frenzy is sustainable, but there will be continued experimentation to determine what kind of offers can entice people to submit new applications. “The industry is still trying to figure out how big those bonuses can be while still making sense for an issuer’s bottom line," McBride said. “It’s important for consumers who are playing the rewards game to keep a thumb on the pulse of what’s happening with new cards and new offers to maximize the return on their everyday spend."
2. Bank of America will try to get another foot in the door.
Chase and American Express have emerged as the two biggest names in the premium credit card competition, but Bank of America joined the race with the launch of the Bank of America® Premium Rewards® credit card. I imagine BofA has some other offerings in the works. A recent article from Gillian Tan at Bloomberg highlighted that BofA CEO Brian Moynihan believes that the bank has work to do in order to catch up in the credit card game. Could we see a top-tier card with a hefty annual fee and hefty rewards potential to match? I'll be keeping a close eye on BofA in 2018.
3. Interest rates will rise.
The potential for earning points won't be the only number moving north. The variable rate tied to your card will follow an upward trajectory, too. “Credit card rates will closely mimic whatever moves the Federal Reserve makes with interest rates,” McBride said. “They’re expected to continue raising rates in 2018 and beyond. Cardholders will see their variable rates ratchet up.”
“If you’re carrying a balance, the fire you need to fight is getting that debt paid off as soon as possible,” McBride said. “Look for a 0% or other low-rate balance transfer offer. It makes no sense to focus on reward points if you have a balance. Get out of debt, and then, you can jump into the world of points and miles.”
4. You can skip the signature.
Checking out with your credit card at physical locations will get faster as more issuers follow Mastercard's lead to ditch the need for signatures. Discover and American Express both plan to eliminate the need for customers to sign a receipt in April 2018. By the end of that year, I expect that pens will disappear from most checkout counters.
5. Your face will replace your card.
Your personal autograph may no longer matter, but merchants still need to verify your identity. Forget asking to see someone's ID, though. As consumers get comfortable unlocking their phones with their faces, that same process could come to the checkout lane. In fact, the facial-recognition movement is already revolutionizing the way that customers at a KFC in Hangzhou, China pay for their food; e-commerce giant Alibaba is testing a Smile-to-Pay service that lets customers check out by, you guessed it, smiling. As card issuers work to balance convenience with security, I expect to see similar experiments in the US.
6. Complaints about your card may fall on deaf ears.
While merchants will recognize your face, your voice may not be as loud in 2018. The Consumer Financial Protection Bureau, the agency that has warned banks against deceptive credit card marketing practices, has been marked by partisan bickering in Washington, DC. Now, President Trump appointed Mick Mulvaney as Deputy Director, and it's likely that the bureau will be more lenient on financial institutions than it was under Obama-appointed Richard Cordray.
“I think you’ll see a more [banking] industry-friendly stance from the CFPB,” McBride said. “Consumers will still have the ability to voice concerns and complaints, but it’s unclear to what extent the bureau will pursue bad actors.”
“There are arguments that the CFPB was too overzealous and politically motivated before,” McBride added. “Will it be too friendly to the banking industry now, or will it strike a balance?”
Illustration by Eirian Chapman.
