Before the 2008 financial collapse, credit card issuers were extremely lax about the approval criteria for card applicants. They offered long introductory periods with zero-percent APR, tons of cash-back bonuses and easy balance transfer options, and they approved people with low credit scores who probably shouldn't have had unsecured credit cards. After the collapse, credit card companies cut back on their extravagant offers and started getting a lot pickier about the applicants they approved.
The economy contracted for a couple of years, and then it started growing again, slowly, until credit card companies began to feel more comfortable issuing cards to a wider range of people. The pre-2008 introductory APR offers came back, along with a slew of perks and extras thrown in to entice new customers to apply for cards. Many things have changed in the past six years, and the credit card industry is undergoing a major upheaval in response to new digital services like Apple Pay and PayPal Here. There is a lot more competition between companies to bring in new customers, and the offers are getting more and more creative.
Free Monthly Credit Reports
Customers opening credit card accounts in 2014 will be given access to a free monthly credit report to stay ahead of their finances. This move helps consumers as much as it does card companies because it makes customers more careful about their spending and less likely to default on their debt. Companies such as Discover, Citibank, Wells Fargo, Sallie Mae, Kia, Hyundai and PenFed are all offering Equifax or VantageScore credit reports to new customers, in addition to the one free annual report every card holder is entitled to receive in the United States. This trend is certain to help students with loans from Sallie Mae manage their repayment schedules.
Digital Payment Options
Services such as Apple Pay and PayPal Here allow users to pay directly from their mobile devices, an increasingly popular trend among millennials in 2014. Apple Pay works with major credit card issuers, such as Citibank, Wells Fargo, Chase, Bank of America and American Express, and according to industry analysts, it is threatening to make the old magnetic-striped plastic rectangles obsolete. Between Google Wallet, PayPal Here, Apple Pay and Square, customers are growing accustomed to paying with their smartphones at the register, though until now, most mobile activity has been confined to checking card balances, monitoring rewards and so on. These digital services and others, such as Loop and Coin, allow users to get rid of the stack of plastic cards weighing down their wallets.
EMV and PIN-Based Payments
Debit card users have been protecting their accounts with PIN codes for years, but heightened security is pushing credit card companies to offer two-step verification for credit cards as well. EMV chips are additional little microchips, embedded in cards, that transfer user verification data to a server when the card is swiped. The initials EMV stand for Europay, MasterCard and Visa, the three companies that jointly developed the technology. EMV and PIN technologies are designed to replace the vulnerable magnetic stripe technology used in earlier cards, and they're becoming popular in response to Americans who have had problems with stolen cards and credit fraud while traveling abroad.
A Bigger Selection of Rewards Offers
This trend mainly applies to card holders with excellent credit, but rewards offers are becoming more generous and varied as companies compete to attract customers. Not only are customers choosing rewards from programs that include flyer miles and cash-back shopping bonuses, but they're receiving offers to redeem points directly from retailers like Amazon.com and iTunes. The standard rewards offers still apply, but as the competition gets more intense, the old stand-by of offering frequent flyer miles and hotel accommodations is losing its value. More customers are choosing cash-back rewards or gift cards for specific retailers, perhaps because they're traveling less often than they were before 2008. These offers may seem generous on the application, but customers should take into account the expense of higher interest rates included with most rewards cards.
Perks and Extras
In addition to rewards and cash-back bonuses, customers are receiving offers for memberships in programs like Amazon Prime and Triplt Pro as a thank you for signing up for cards. Card companies have agreements with retailers to offer these sign-up bonuses, which include perks such as sports tickets, concert tickets and incentives to shop with particular retailers. In this case, the trend is for card companies to become partners with popular websites and retail chains; customers can usually check out current offers on the card issuer's website or the partner site.
Help for People With Poor Credit
Now that the economy has had several years to improve, credit card companies are in a position to increase their market share and, as a result, have been loosening the constraints on applicant approvals. While cards may be more readily available for people with bad credit, the sign-up bonus offers, perks and rewards are usually a lot less generous. However, compared to the situation several years ago, these consumers have much better options and are able to rebuild credit with cards with higher interest rates and fewer rewards. It helps that many cards are offering free credit reports for new customers to keep track of their creditworthiness.
Less Valuable Flyer Miles
On the negative side, rewards such as frequent flyer miles and travel accommodations are becoming less valuable as the economy conforms to a new landscape in the travel industry. As prices go up in airline and hotel markets, credit card bonus miles and hotel rewards are remaining the same. The result is that these rewards are worth less than they were before the financial collapse and perhaps never will be worth as much again.
A Larger Mound of Debt
Of course, as credit card companies vie to expand their market share, more and more consumers are adding to the mountain of debt owed by Americans. Not only are more people going into debt, but people are taking on more individual debt as well. This news comes from the Federal Reserve Bank of New York, which reports that consumer debt has risen dramatically since 2013 and continues to climb upward. However, a greater overall amount of debt is simply a sign of a strengthening economy, so consumers shouldn't be too worried.
The trends in the credit card industry are shaping the ways consumers pay for the things they buy. At the same time, they're a response to the changes in consumer habits. Most of the changes in the industry are positive, so card holders should continue making purchases with confidence.
