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5 credit card predictions for 2020

Jan. 01, 2020
9 min read
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2019 has been a busy year in the world of travel rewards cards, with some massive welcome bonuses, new perks being added to cards and the launch of a few new cards. It's easy to get caught up in the fast-paced game of chasing new welcome bonuses, but it helps to zoom out and take a look at the big picture changes that are going on in the travel rewards credit card business. Today, I'm going to make five predictions about the changes we'll see in 2020 and beyond.

(If you want to see how well we did on last year's guesses, make sure to check out TPG's credit card predictions for 2019.)

Annual fees will continue to rise

While we like to think about competition between card issuers as being universally good for consumers, in reality it's a bit more cyclical, and we're in the late stages of the cycle right now. Tell me if this sounds familiar:

  • increased demand from consumers draws more competitors to the market
  • competition drives down costs (or in the case of this industry, leads to larger welcome bonuses and more valuable card perks)
  • lower profit margins causes some companies to leave the space or raise prices

American Express is a prime example of this last point. Since the end of 2018, Amex has significantly raised the annual fees on more than 10 of its credit cards, while adding some new benefits to partially offset the higher cost. These include the personal and business versions of the The Platinum Card® from American Express, American Express® Gold Card, Gold Delta SkyMiles® Credit Card from American Express, Platinum Delta SkyMiles® Credit Card from American Express and the Delta Reserve® Credit Card from American Express, as well as the personal version of the American Express® Green Card. This is in addition to Citi jacking the annual fee on the Citi Prestige® Card up to $495 while gutting some of the card's most popular benefits. The information for the Citi Prestige Card and the Amex Green Card has been collected independently by The Points Guy. The card details on this page have not been reviewed or provided by the card issuer.

The last decade saw banks spending lavishly to attract new customer with welcome bonuses, and now things are starting to tighten up. One of the easiest ways for banks to recoup this initial customer acquisition cost -- especially with savvy customers who might just use a card for its welcome bonus and benefits and not actually spend on it -- is to increase the annual fee.

Card refreshes will continue to outpace new product launches

The Chase Sapphire Preferred® Card launched more than 10 years ago, and a lot has changed since then. For example, when the CSP launched, Continental Airlines and US Airways were both independent airlines, before merging with United and American Airlines, respectively. This means that many of the credit cards launched over the last decade aren't competitive with -- or even worse, aren't relevant to -- today's market. When this happens an issuer has two choices. It can either update the card or launch an entirely new one. Updates are more common, as banks love economies of scale, and each new card launch requires an extensive upfront investment in branding and design, legal disclosures and compliance, marketing, customer acquisition and more.

We've seen Amex adopt this strategy with its portfolio of Delta cards that are slated to get a refresh in January 2020, and I expect other banks and issuers to follow suit. The massive success of transferable points cards has put a squeeze on cobranded airline and hotel cards, which often don't stack up well from a benefits and earning perspective. As we look to 2020 and beyond, I expect to see more airlines and hotels continue to refresh their credit card offerings to keep them competitive.

Banks will make it harder to earn welcome bonuses

When Chase first implemented the 5/24 rule a few years back, many longtime award enthusiasts feared that this was the beginning of the end of their beloved hobby. While that couldn't have been farther from the truth, it is getting harder to earn welcome bonuses from almost every major issuer, a trend that I expect to intensify in the coming years.

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While Amex already had a pretty restrictive rule that only allowed applicants to earn the welcome bonus on each of its credit cards once in a lifetime, things have gotten even more restrictive recently. Amex launched a pop-up "bonus eligibility checker" that will tell you during the application process if your past relationship with Amex has made you ineligible to earn a bonus on the card you're applying for. While we don't know exactly what goes into this algorithm, factors like opening many cards in a short amount of time or closing your cards after exactly one year appear to be blocking people from earning future bonuses.

Expect in the coming years to see even more issuers add 5/24-like rules that restrict the number of cards you can open, and for more issuers to adopt a dynamic approach like Amex that tries to positively identify low-value credit card churners and stop them from getting more welcome bonuses. Make sure that you factor this shift into your points-earning strategy. The gravy train can't last forever, so make sure you're ready to supplement your points earning by using online shopping portals, dining programs and other strategies.

Welcome bonuses will require higher amounts of spending over longer periods of time

When credit card issuers budget for the welcome bonuses they offer, they're really trying to balance two important business metrics. The first is customer acquisition cost, or how much money they have to spend in order to create a new customer. The second is lifetime value, which is how much money they expect to make over the course of their relationship with that customer.

Welcome bonuses are expensive to banks, and the old formula of "spend X amount of money in the first three months" doesn't do much to boost the lifetime value of a customer. By increasing the amount of spending required to earn a welcome bonus and extending the amount of time customers have to hit the spending requirement, banks can effectively address this concern. Even if a user doesn't plan on keeping a card open long-term, doubling both the amount of spending needed to earn the bonus and the amount of time to do it increases the custumer's lifetime value to the bank.

We've seen this trend take off in recent years, but I expect it to grow considerably and even become the norm by the end of 2020.

As an example, the following cards are all offering welcome bonuses that are split into two or more tiers and require an above-average amount of spending:

CardFirst bonus tierSecond bonus tier
The Business Platinum Card® from American Express ($595 annual fee; see rates and fees.)
Earn 50,000 Membership Rewards points after you spend $10,000 in the first three monthsEarn an additional 25,000 Membership Rewards points after you spend an additional $10,000 in the first three months
Capital One Spark Miles for BusinessEarn 50,000 miles after you spend $5,000 in the first three monthsEarn an additional 150,000 miles after you spend $50,000 total in the first six months
British Airways Visa Signature® CardEarn 100,000 Avios after you spend $5,000 in the first three monthsEarn an additional 50,00 Avios after you spend $20,000 total in the first six months

Card issuers will look to offer more unique perks

Of all the card refreshes this year, the one that caught my eye the most was the recent update to the American Express® Green Card. Too many premium credit cards offer the same overlapping perks, including a Priority Pass membership and a TSA PreCheck/Global Entry application fee credit. While those are must-haves for any serious traveler, each person only needs one of them. Sure you can gift the Global Entry credit to a friend or family member, but those perks that you're paying a steep annual fee to enjoy become redundant very quickly. Enrollment required for select benefits.

Amex changed things around with the Green Card, offering (among other things) a $100 statement credit towards a CLEAR membership and a $100 annual statement credit for LoungeBuddy passes. With TSA PreCheck lines around the country getting quite crowded, CLEAR is a great alternative if it's available at your airport. Similarly, LoungeBuddy partners with a number of great airline lounges that aren't accessible through Priority Pass. In this way, Amex differentiated the Green Card from a crowded market and made it appealing to customers who might already have premium perks from the Platinum card. Enrollment required for select benefits.

In the coming years, expect to see more credit card issuers come up with unique perks to justify the increasingly high annual fees they'll charge. Some things high on my wish list include statement credits for Amazon Prime or any of the streaming services, Lyft credits or different dining credits to complement the one offered by the Amex Gold Card. Enrollment required for select benefits.

Bottom line

As 2019 draws to a close, now is a good time to zoom out and take stock of the big changes happening in the award travel industry. For the last couple years we've had it relatively easy when it comes to getting approved for new cards and earning welcome bonuses. With banks expected to continue tightening up restrictions in the coming years, make sure you work on developing alternate methods to earn points and keep your balances high.

For rates and fees of the Amex Business Platinum, please click here.

Featured image by Sasha Stories via Unsplash.

Featured image by (Photo by Sasha Stories via Unsplash)
Editorial disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

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