Issue #29 of the Credit Card Reviews Industry Expert Roundup centers on expected credit card trends for 2019. The panel of experts share their insight and speculate about what this year will bring to plastic (and metal) in response to Jason Steele's question:
"What are your predictions for the credit card industry in 2019?"
Gary Leff - Travel expert and author of View from the Wing, a travel blog established in 2002.
There’s a reasonable risk of recession some time in 2019. The Federal Reserve has been raising interest rates. Together that means higher cost of capital for banks and greater repayment risk on the credit they extend. As a result I see approval standards for premium rewards cards tightening.
Initial cardmember bonuses remain crucial to attracting customers and demonstrating to them that the card has value quickly, in order to encourage moving a new card top of wallet. The fact that Barclays wasn’t successful with Arrival Premier moving consumers to a model of rewarding them after they’ve proven their value to the bank means that issuers can’t move away from big up front rewards.
I continue to be impressed by how competitive the market is for the business of prime customers attracted to rewards. American Express continues to invest heavily in products like Platinum and their Gold Card which gives 4 points per dollar on US restaurants and on the first $25,000 spent each year at US grocery stores. Chase has been at the top of the industry investing in rewards for their own branded cards and renewing pricy travel co-brands. Capital One has newly come on making their Venture product more valuable for consumers with several new benefits. Citibank is even improving the points-earn on their Prestige product while reducing the cost of some of the benefits the card provides.
I do think though that we’ve reached a point where cards cannot be even more rewarding than they are today overall. As a result beyond 2019 we’ll see more targeted use of investments so that they’re relevant to individual consumers rather than spending money in ways that may or may not resonate with any given cardmember. In other words banks will need to make more effective use of the investments they’re making in rewards spend.
Holly Johnson - Founder of Club Thrifty
In 2019, I anticipate card issuers continuing to come out with new and innovative rewards and travel credit cards and programs. Competition is fierce between major card issuers like Chase, Citi, Barclays, and American Express, so both the big players and everyone else will have to continue innovating if they hope to maintain or increase market share. Hopefully this means more lucrative signup bonuses and new cash-back and travel credit cards for consumers.
Since card issuers tightened up their requirements for approvals and signup bonuses in 2018, I anticipate and hope that they might ease some of the most rigid requirements in the new year. It has become increasingly difficult for consumers to get their hands on new rewards cards due to new signup bonus rules. I anticipate that banks might realize they are not only shutting out credit card gamers who are unlikely to be profitable, but also regular people who might keep their card for the long haul if they had the chance to try it out.
Beverly Harzog - Credit card expert and consumer finance analyst for U.S. News & World Report.
This past year, we’ve seen issuers embrace lifestyle categories by offering rewards for things such as dining and Uber rides. I expect the rewards in lifestyle categories will continue to improve as issuers compete with each other for consumers with high credit scores. Also, we’ll see more consumers using virtual wallets and mobile payments. Changes like this happen slowly, so this isn’t the end of the plastic credit card. It just means more consumers will explore payment options that they find convenient.
But rewards aren’t the only increases we’ll see, unfortunately. Interest rates will continue to rise slowly during 2019. When the UltraFICO Score is available in during mid-2019, many almost-prime consumers will have access to credit. This indicates that issuers have a desire to loosen up credit a little, so I expect to see consumer credit, especially revolving credit, increase. Spending certainly helps the economy, but it’s going to be important for those who benefit from an easier credit environment to have a budget and stay out of debt.
Levi King - Co-Founder of Nav
There’s one main trend that I think we’ll see accelerate. The competition is fierce between traditional credit card providers and alternative lenders as the latter extend new tech to capital. We’ll see the credit card issuers trying to compete with two different strategies.
The first is that they’ll get more aggressive when it comes to rewards, cash back, etc.— the usual stuff. The second is that they’ll offer more flexibility on payment terms. Let’s say your card limit is $5,000, for example, but because of what you’re buying, you can spend twice that and have 90 days to pay it off.
I think that’s a better deal for small businesses -- more so than the rewards. The rewards are already pretty good with most providers, and so to have flexibility in how much money I can put on the card at any given time, and even more flexibility in paying it off, that just provides a tremendous value.
And even for a consumer, it’s huge. And what that’s starting to do is cut into other types of financing. If I know that I’ve got three months to pay off the card instead of them beating at my door next month, I’m going to use it instead of some other source of capital (e.g. an alternative lender, borrowing off my 401k, dipping into savings, etc.). It’s making the overall pie bigger.
The biggest trend is that credit cards will have an increasing ability to rob other types of lending or borrowing. The issuer is now competing with your savings account, with your parents, with a loan from OnDeck. If you don’t need to go to those other sources and can just use your card, the card’s going to win.
I think we’re seeing some of that, but we’re still in the early innings. American Express is probably doing the best at leading that charge today, but it’s a matter of time until other issuers start doing it, and that can go a long ways. I think that’s the trend that’ll be the most game-changing in 2019
Angelina Aucello - EWR based travel expert
It’s no secret that the credit card industry is highly-competitive and constantly evolving as banks and card issuers aspire to polish up their existing products, better understand how users are spending, and remain relevant and profitable. My predictions for the credit card industry in 2019 is that we will continue to see the expansion of “benefits” and increase in annual fees, especially in super-premium credit cards. Two popular cards (the Citi Prestige and The American Express Business Platinum) just made announcements of “enhancements” followed by a spike in their annual fees. While the banks sent out notice about the changes to benefits, it is up to consumers to make the decision if paying the extra for those benefits are worth it for them and how they presently use the card. In 2019, I believe there will be more changes as a way to justify an increase in fees. I also think that issuers will keep a close eye on how card members are reacting to the news and would be open to pulling back or further fine-tuning the card to keep long term card members happy.
Jason Steele - Credit card expert and founder of the credit card media conference CardCon
The race to offer ever increasing value propositions is clearly unsustainable, and card issuers will have to resort to new tactics to maintain profitability. Fortunately, there are plenty of ways that they can achieve that. For example, American Express is undertaking new partnerships with merchants such as Uber, Saks Fifth Avenue and WeWork to offer credits to cardholders who shop with those merchants, and I’m sure there’s something in it for Amex.
Another way that card issuers can make more profits from customers is to tie card membership into other banking products. For example, the Fidelity Rewards Visa Signature card offers the best rewards when you deposit them into a qualifying investment account, and the PenFed Pathfinder card offers additional rewards when cardholders also have a checking account with that credit union. Expect to see more card issuers offering the best rewards to their best customers.
Bill Hardekopf - CEO of LowCards.com
Typically, when an issuer raises the annual fee of a credit card, the potential market for that card gets a little smaller. After all, the great majority of credit cards come with no annual fee. In addition, so many consumers have fair to poor credit, so they would not be approved for these cards. But if we just look at the consumers who would qualify for a premium card, raising the annual fee will not necessarily deter those consumers from applying for that card. These premium credit card consumers are savvy. It will all depend on the cost-benefit analysis that these consumers will likely do. If the incremental rewards significantly outweigh the additional annual fee, they will consider paying the extra fee. But the incremental rewards have to appeal to that individual; they need to be rewards that will surely be used. And the cost-benefit can't result in just a "push." If it's an additional $100 in rewards but you pay an additional $100 annual fee, it likely will not be worth the risk. The Chase Sapphire Reserve card showed that consumers will flock to a card, even with a very high annual fee, if the rewards are appealing.
