Heading into 2018, consumers shopping for a new credit card will be the beneficiary of a highly competitive market as credit card issuers vie for the number one spot in their wallets. Although the financial landscape was generally positive in 2017, here are three trends you can expect when shopping for a new credit card in the upcoming year.
Expect to Get Approved (With Good Credit)
According to TransUnion, consumer credit availability is likely to remain strong in 2018, consistent with 2017. Strong job growth and low unemployment are sure to keep default rates low, meaning credit card issuers are more willing to approve those with positive track records. 2018 will see more brands being launched by retailers trying capitalize on their customers’ loyalty, resulting in a highly competitive marketplace. Consumers can expect to be approved – if they have good credit.
“There’s nothing to indicate right now that lenders are pulling back wholesale in any given area,” said Matt Komos, vice president of research and consulting at TransUnion. “My guess is credit card issuers will stay on the same path they’ve been on over the past year. They’ll continue to focus more on prime and above tiers, but not necessarily cutting off everyone below that.”
Expect Interest Rate Hikes
The Federal Reserve has slowly been raising interest rates since December 2015 in an effort to normalize borrowing rates. As a result, average credit card APRs have risen to an all time high of 16.27 percent. The Fed has indicated that they expected to make a .75 hike over the course of 2018, which will be reflected in the APR consumers pay for borrowing, and more tangibly in the minimum amount they owe each month on their balances.
One caveat to the APR rise is that banks are offering more and better balance transfer deals to retain your loyalty. Look for 0% intro rates to transfer a balance and a long 0% intro APR on purchases to sweeten the deal.
Expect More Customized Rewards
As competition continues to grow with an influx of new retail credit cards, issuers will become more creative in marketing their cards. Over and above the number of cardholders, issuers are striving for loyalty, seen as a doorway for their clients to consider other financial products offered by the issuer, i.e. mortgage and auto loans.
You can expect to see fewer signup bonuses, one of the most successful (but expensive) campaigns for credit card issuers, and more long-term incentives. According to the 2017 J.D. Power Credit Card Study, customer satisfaction is highest on cash-back cards, so banks will be launching new cards to capture the demand for cash.
Card issuers will offer more rewards for streaming media services and partner with high-end brands such as Uber to provide more personalized perks to match the life-style of the individual cardholder. For example, Capital One offers incentives and discounts for customers who use multiple products across its Spark Business Suite, and Capital One Quicksilver users can get 50 percent off their Spotify Premium subscriptions.
Ultimately, as long as consumers are on the hunt for incentives, issuers will continue to strive for new, innovative strategies to keep them happy. And smart consumers should tread lightly to reap the benefits of personalized rewards while paying off their balances each month to avoid the higher interest rates that are sure to come.