As people start setting resolutions and dealing with holiday season debts, the New Year brings with it a refreshed interest in credit cards. But it is not just consumers that are looking for a change: credit card issuers have already been looking towards this year for new ways to build up customer bases and beat out competitors.
While credit card issuers could change their approach, features introductory offers at any time of the year, January sets the tone for the year ahead. It is also a time when lots of industry reports are released discussing predictions and consumer trends.
Armed with this knowledge base, and fuelled by the “fresh start” tone that comes with the start of a new year, credit card issuers start planning exactly what they will do in 2015. Often there are many things that stay the same – such as marketing campaigns – but usually, there will be a few key elements that are new to everyone.
What’s most important about this process, however, is that it has the potential to affect consumers significantly as features change for existing cards and new products are tested or released. Regardless of when these changes happen, being aware of them now will also help you make more informed decisions about the how and when you use credit cards, as well as what options are right for you. So here we have rounded up five of the biggest areas of change predicted for credit cards in 2015 and how they could affect you.
Credit card interest rates in 2015
The consensus from experts and Federal Reserve officials is that there will be a rate rise at some point in 2015, and credit card rates are expected to go up in line with these changes. But it’s not just the official cash rate that could raise credit card interest rates – according to global market research company Mintel, we have already seen an increase in the average APR due to changes in credit card issuer strategies.
“Instead of predominantly targeting consumers with high FICO scores, some are now extending new card offers to consumers with less than stellar credit,” Mintel reports.
“Chase, Citi and Capital One all mailed fewer offers to prime consumers in 2014, a strategy that has driven up the average purchase APR to 15.80% from 14.95% a year ago.”
That’s almost a whole percentage point increase in a 12-month period – without a much significant change in the cash rate – and it goes to show how other factors affect our credit card APRs. The good news is that you should have a bit of time before any significant interest rate changes come into effect, with most predictions saying there will be changes from around spring.
But in the meantime, it could be a good idea to start looking at other credit card options based on how you use your account. If you carry a balance, for instance, considering a fixed rate credit card could help you keep on top of interest costs. Only a few credit unions and smaller lenders – such as the Western Federal Credit Union and Qside Federal Credit Union – offer fixed-rate credit cards, but they are worth it if you know you will have a balance for most of the year.
Another option is to look at balance transfer credit cards, which offer low-interest rates for a set amount of time. The introductory offer rates of BT credit cards are generally fixed for the honeymoon period and, with some cards offering deals that last for over 12 months, are often a smart way to save on interest charges and deal with debt.
There are two main kinds of credit card introductory offers: bonus rewards and balance transfers. While reward bonuses are likely to stay basically the same (save for changes in the actual rewards offered), when it comes to balancing transfer credit cards, 2015 looks like it will be the end of 24-month BT deals.
While super long balance transfer periods have been the norm for a while, changes in the official cash rate are likely to have an impact on these deals. According to Mintel, credit card issuers are already feeling a pinch due to economic changes, and a rate hike could be the catalyst for “a squeeze in credit card pricing not seen for several years.”
“Card issuers have already begun cutting back on some of the longer duration 0% intro offers lasting 18 months or more,” Mintel says.
“Look for more offers in the 13-17 month range (consumers should grab those market-beating 24-month offers while they can).”
But before racing off to apply for the first 0% balance transfer card you find with a long intro period, it is important to remember that other features (such as the ongoing rates and fees) are just as important. There’s also no need to panic about balance transfer offers – even if they are a bit shorter they will remain competitive in 2015 as issuers fight each other for our business.
After all, balance transfer deals have become a staple of the credit card industry, so they are not going anywhere. Basically, credit card issuers need BT deals as much as you want them – and it will pay to remember that in 2015.
Credit card rewards
There could be a few changes on the cards for rewards this year. For starters, Mintel says there will be a revival for cash back cards that offer great rates and straightforward redemptions.
“Cashback has been making a comeback, reversing a trend towards cards that promote the flexibility of loyalty point,” Mintel says.
The prediction follows the release of the Capital One Quicksilver card late in 2014, which offers 1.5% cash back on all purchases. Other recently launched cash back cards include the Citi Double Cash Card and the Discover it Chrome. Mintel also says the Barclaycard Rewards card is also being “repositioned as a cash back card”, and other points-based cards could jump on the bandwagon by promoting the exchange of points for cash or gift cards.
Mintel says we can also expect “new cash back card innovations and product launches as issuers respond to the changing competitive landscape” in 2015.
Beyond cash back, there is also a good chance that credit card reward programs based on points will get a boost from new partnerships and/or retail offerings. As Pricewaterhouse Cooper (PwC) explains, reward programs give companies a way to collect and analyze valuable consumer data so they can plan their marketing efforts more effectively.
PwC says that 2015 is a time when companies in the payments industry have an opportunity to use reward programs for more powerful partnerships with merchants, as well as more data.
“These programs are becoming more and more pervasive, offered by an ever-broader assortment of national and local retailers, and their success in an era of “big data” is determined by how well they are integrated with the consumer’s path to purchase,” PwC says in a report on the payments industries in 2015.
“The customer’s location — physical store, mobile computer or desktop, smartphone or tablet — as well as recent purchase history, browsing habits, checkout completion rate, response to marketing impressions, and type of credit card used are among the many data points that payments providers can help retailers evaluate to make rewards programs more relevant to individual consumers.”
PwC indicates this data could prove essential for retailers that are trying to stay afloat in an increasingly global, and fragmented market. So as a result, we could see more reward programs, different partnerships between credit cards and retailers and a number of other changes to the kinds of rewards programs out there.
More mobile payments
The rollout of EMV or chip credit cards, as well as the NFC (Near-Field Communication) technology many of them provide, means we will have more ways to pay with or without a credit card on hand. While NFC credit cards allow you to tap instead of swiping or inserting cards for a payment, the tech behind them has also inspired smartphone designers to include features that allow you to pay right from your cell phone.
Both Mintel and PwC are among the companies predicting a boom in mobile payments for 2015. Mintel says the release of Apple Pay marks the start of mainstream mobile payments, suggesting many more will follow and already established mobile payments will also become more prominent.
“The Apple Pay launch has prompted some much-needed momentum to the development of mobile payments in the US and card issuers and networks have been ramping up their Apple Pay marketing efforts as a result.”
This prediction is backed up by PwC, which says collaboration is the key to making mobile payments more acceptable.
“To break the competitive logjam and allow different players to build mobile payment applications more easily, we foresee more collaboration on open technology platforms,” the company says.
For consumers, this will mean more ways to pay and, potentially, more incentives to try out new payment methods, with Mintel even suggesting some credit card companies could offer financial incentives to customers curious about new payment technology.
Credit card security
The spate of security breaches in 2014 has renewed concerns around security, and also motivated both credit card issuers and merchants to make changes to their credit card security options. What’s more, in 2015 the pressure shifts from issuers to merchants when it comes to dealing with fraud, as the latter become responsible for liability for fraud payments.
While fraud liability will shift from banks to merchants in October, that does not mean the former will forget about our security. The fallout from data breaches last year has left many cardholders concerned about their personal information and reluctant to pay with plastic for fear of fraud.
As a result, credit card issuers have started to include security information and services in their marketing efforts – a trend set to continue in 2015.
“Just consider Discover’s recent TV campaign promoting fraud protection or Capital One’s “Second Look” pilot program that alerts cardholders of auto-renewals and double charges,” Mintel says, adding that we should look for increases in “chip card communications and innovative new security products or features.”
While the basics of credit cards stay the same from year-to-year, many of the features are adapted to give issuers a competitive edge. In many cases, that means more features that suit our needs – such as different rewards programs and security services.
On the other hand, external pressures like the official cash rate and current lending market mean that changes will not always be in our favor. But higher interest rates are not the end of the world and, if you are aware of the potential for change now, you are less likely to overlook rate changes that could be applied to current cards.
Although some of the predictions above may not come to fruition in 2015 (and others we are not aware of yet might), these insights give you an added level of awareness around your credit cards and the industry itself. And that means you can make sure you get a card that has the best rates for your needs.