The card landscape is more competitive than ever as issuers vie for the No. 1 spot in consumer’s wallets.
There are more card offerings, which gives consumers the opportunity to score meaningful rewards when they choose the right credit card. That will place an onus on better rewards, lower fees and higher levels of cash back in categories that match changing spending patterns dominate new offers in the credit card space.
There are key trends driving the credit card space that feed cash back and other rewards. For example, Americans added $43 billion to their credit card balances during the 2017 holiday season (November-December), up 6% versus 2016, according to a CompareCards analysis of Federal Reserve data released last week.
For consumers dealing with unexpected holiday spending, a balance transfer to a better rate can help with financial help and retaining relationships. This January has more cards offering a $0 introductory fee for balance transfers, and 0% rates for over a year.
And since the Fed started raising rates at the end of 2015, the average interest rate on outstanding credit card balances has increased 86 basis points according to a CompareCards analysis of Federal Reserve data. That represents $7 billion in extra interest owed this year for Americans who carry a balance on their credit card, on a base of $800 billion in credit card debt. With a forecast of more hikes in 2018, just two more could be $10 billion or more in additional interest owed this year since the Fed raised rates.
Issuers are sweetening the balance transfer deal for consumers looking for a way out of credit card debt. More cards offer $0 intro fees to transfer a balance and longer 0% intro APR. That gives people a more cost-effective way to pay down debt without new monthly interest piling up.
Spending patterns also suggest expanding dining and food rewards. The answer to “what’s for dinner” is more often takeout and dining out than in past years. Issuers are following the money as consumer spending patterns shift to include more restaurant spending. That means expanded dining and food focused cards with higher reward levels on this spending.
Cash back and premium rewards are another option. The 2017 J.D. Power study found that overall customer satisfaction is highest on cash-back cards. Issuers are launching new cards in this space to capture demand for cash and creating travel rewards structures that mimic cash-back programs.
And the list of perks continues to grow for luxury travelers willing to fork over annual fees that can top $500 on some premium travel cards. From airport lounge access to travel credits worth hundreds of dollars to free hotel nights, intense competition has emerged in the high-end travel credit card space. Issuers are dangling long lists of valuable benefits on premium cards in efforts to attract new customers in the luxury segment.
Additionally, issuers are creating and enhancing customer loyalty programs that incorporate credit cards into the holistic financial picture. Banks are rewarding customer loyalty with higher levels of credit card rewards for existing customers.
Consumers are also concerned about the mix of security and experience. Issuers are focused on increasing the ease of point of sale transactions. Some issuers are moving toward the elimination of signature requirements at point of sale. And issuers are helping consumers lock down their credit cards against fraud. From an app that will freeze your credit card account instantly to free fraud alerts to Social Security number alerts, consumer protections on credit cards are hitting new heights.