This is Mr Credit Card from www.askmrcreditcard.com. As we come to the year end and holiday, I would like to make some predictions on how the credit card industry is going to evolve as CART Act takes effect.

At the end of 2008 when the credit crisis was at the peak, credit card issuers hunkered down. They were facing rising defaults and they started pulling back on rewards that were so common before. Then in 2009, there were lots of adjustments being made as issuers adjusted to the new CARD Act and more rising defaults. One the one hand, they were increasing interest rates, reducing credit lines and even closing accounts on (what they perceived as) their most risky customers. There were a lot of unhappy campers because there was obviously a lot of collateral damage as well on folks who actually were good customers and had good credit scores. At the same time, credit card issuers also went into overdrive and introduce new line up of cards. Many of these cards were designed to attract higher end customers.

Today, I’m going to highlight some of the developments in 2009 and how I see credit cards evolving going forward.

2009 saw a massive reduction in the rewards and deals. The cash reward sector suffered the brunt of it all. Credit card issuers used to be very generous in giving 5% rebates for things like gasoline and supermarket spending. But as the credit crisis wore on, they started to reduce the rebates they paid for these types of expenses. To maintain the attractiveness of their cards, they resorted to a couple of tricks. One of them is the concept of rotating categories. Instead of paying someone 5% on gas the whole year round, they only do so for a certain period. Another thing that issuers have developed is the concept of shopping portals. The best cash back credit cards these days offer them as another way to attract new customers. Shopping at these shopping portals with their online partners will give card holders quite a bit of rebates.

2009 also saw a decline in the types of 0% balance transfer offers that were so common pre-crisis days. In the past, credit card issuers competed furiously with each other for new customers. Customer acquisition was the name of the game. Then as default rates rose, risk management became the name of the game. Credit cards stopped offering 0% deals for 12 months and instead cut them down to 6 months. Rather than waiving balance transfer fees, they started charging them again. Instead of capping the balance transfer fees, they removed the caps.

Credit card issuers also drastically reduced their rebates for gasoline credit cards. They used to pay 5% rebates for any gasoline purchase a cardholder made. But cardholders got savvy and just used these cards for gasoline and this forced issuers to lower their rebates to the 2% and 3%.

Increasing rates and reduce credit lines – Yep, that’s what credit card issuers have been doing. They have been increasing rates before CARD takes effect and slashing credit lines.

Despite the stuff that happened, there were some silver linings in the credit card industry. There were new and better cards being promoted. For example, in the beginning of the year, Barclays launched a new prestige card called the Visa Black Card, with a $495 fee attached to it. It goes head on versus the Amex Platinum and Black Card. Chase vastly improved their ultimate rewards program and introduced new cards like the Chase Sapphire Card and the Slate Card. The even came up with BluePrint, a use friendly suite of tools to help the consumers better manage their debt.

Towards the end of the year, credit card issuers started offering 0% APR deals for 12 months again. This is a sign that credit conditions are improving.

Recently, I have also noticed firms like Discover, Chase and Amex advertising a lot of television. This really was in contrast to the beginning of the year, when they went total radio silence.

I think the biggest change we are going to see in 2010 is a clamp down on the subprime credit card market. The sub prime market took a hit this year and many folks defaulted and many cards simply shut shop. I believe we will see more transparency in fees and even a decline in fees for these so called bad credit cards. Presently, when you apply for such a card, you will be hit with a one-time application fee and sometimes a one-time processing fee as well. On top of an annual fee, they also charge a monthly maintenance fee which amounts to over a hundred dollars! I personally hope to see fees comes down though that may mean less credit card approvals (though that might not necessarily be a bad thing).

(1 votes, average: 4.00 out of 5)

 Loading ...