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In 2020, you probably traded the thrill of booking an island getaway on your credit card with the excitement of placing a curbside order for an at-home margarita kit. It’s been a challenging year in the face of the pandemic, but there is good news ahead in the new year.
“I think 2021 is going to be a real bounce-back year for the card companies,” Ted Rossman, industry analyst at CreditCards.com and Bankrate, says. “While we’ll have to watch what happens with the virus, the vaccine, and government stimulus action, the worst is over for the banks. Consumers can use that to their advantage. There are going to be some good deals and real rewards opportunities.”
What’s in store for the plastic (or titanium or whatever your card is made from) in your wallet next year? Take a look in the credit card crystal ball for seven predictions that will shape 2021.
Some temporary card features will become permanent fixtures
In 2020, banks recognized that they needed to make being a premium cardholder valuable even when you were staying at home, and they adjusted accordingly with higher values for redeeming points for groceries, statement credits for food delivery, and other ways to earn and cash in points during quarantine. Most of those benefits came with an expiration date, but Rossman believes that “there is a good chance a lot of those perks will stick around.”
“Even before the pandemic, there was a shift toward more flexibility with rewards,” Rossman says. “Most people prefer cash back. It’s simple, and it’s universal.”
Rossman believes that cardholders should watch for other everyday features, too. “There’s a trend toward memberships with in-home exercise discounts and benefits with food delivery companies,” he says.
Get ready to pick your perks
Saving money on riding a Peloton or scoring zero delivery fees can be nice, but those benefits don’t matter to everyone. Alex Miller, founder and CEO of UpgradedPoints.com, believes that banks will ask customers to pick rather than receiving all of them automatically.
“There are many consumers who won’t use a shared ride credit, but will use a streaming credit, for example,” Miller says. “So the tough part for card issuers is to find a balance between offering a card that lists exciting perks and also making the card usable for consumers.”
Miller expects that cards will follow the lead of airlines who give elite status members the chance to pick which benefits they want to use.
“If you know you won’t be dining out, you can choose a wireless credit, or if you know you’ll be shopping heavily at grocery stores, you can choose that [instead of] a streaming credit you might otherwise not use,” Miller says. “Card companies need to make their respective cards appealing to more consumers, especially in a rapidly changing environment like COVID.”
At some point, your points are going to take a hit
Here’s one thing you definitely won’t find appealing: less-powerful points.
“Going into next year, consumers will have amassed a lot of points this year [when they weren’t traveling],” Miller says. “So we can, at some point, expect a devaluation of miles and points because there are too many miles out on the marketplace that aren’t being used. Airlines need to negate this with a devaluation of their award charts and offerings. Expect to see either several devaluations or many major sales to encourage consumers to rid themselves of the points they’ve amassed.”
While devaluations are never good news, you can get ahead of the curve. Miller highlights that airlines and hotels will all offer flexible booking policies in order to get people feeling excited and comfortable about leaving home again. So, if you’re even considering taking a trip at some point next year, consider cashing in your points now. If the policy indicates that you can cancel, Miller says “there’s really no harm in booking now because you know you can get your points back if you need to.”
Look out for an alternative rewards currency
Speaking of points, some new cards are gearing up to disrupt the system. Instead of racking up points that translate to dollars and miles, Fold has plans to help cardholders join the cryptocurrency world by rewarding them with Bitcoin on every purchase made in cash.
The card isn’t accepting applications yet, but you can join a waitlist. With the recent PayPal embrace of cryptocurrency, Fold seems well-positioned to gain some traction. The company won’t be able to compete with the marketing budgets of the big banks, but for anyone interested in dipping their toes in the Bitcoin world without actually buying it, this seems like a no-risk solution.
Contactless still has a hill to climb
Before the pandemic, consumers in the US weren’t on the contactless payments bandwagon. At that point, swiping was still a regular routine at gas stations, and the migration to chip cards felt like a recent move. Concerns about virus transmission have certainly helped spur the contactless revolution this year, but Rossman believes it will be a “pretty slow evolution” to replace the habits of using cash or inserting a card at the register.
A Mastercard survey from July showed that more than 50% of US consumers are now using some form of contactless payment — an impressive figure from the low base in the US, but it’s clear that there is still a long way to go to make contactless ubiquitous. That growth will rely on you, so expect any new card you receive to have the contactless symbol. It will also rely on small businesses — particularly restaurants — to adopt a touch-free transaction experience.
If you have great credit, get ready for excellent sign-up offers
“If you have good credit and a good income, you’ve got options,” he says.
Rossman highlights that banks appear to be feeling better about the economic outlook and less concerned about the potential for a dramatic surge in delinquencies. “Banks are feeling better,” he says. “We will see a lot of lofty bonuses. Airlines and hotels will roll out some compelling offers to get people excited and traveling again.”
However, Rossman points out that those big bonus opportunities will be reserved for upper-tier consumers with very good to excellent credit scores.
If you don’t have good credit, there’s good news, too.
“There is a lot of room for innovation, and in the near term, I think we’ll see fintechs continue to work to provide better access to credit,” Rossman says.
Rossman points to Petal and Tomo as two prime examples of companies that are developing alternatives to traditional credit score evaluation metrics in order to help those with subpar or no credit join the credit card world.
“For young adults and immigrants, establishing credit has been a real pain point,” he says. “In 2021, I think we’ll continue to see fintechs do what banks cannot or will not do to give more people access.”