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The COVID-19 pandemic forced credit card companies to make dramatic changes in 2020, some of which will continue into 2021.
Many issuers tightened their underwriting, leaving consumers with fewer card options to choose from if they had less-than-good credit. Balance transfer cards all but disappeared, with some exceptions for those with excellent credit. Travel rewards cards raced to remain top-of-wallet at a time when travelers were canceling trips in droves.
In 2020, we also saw plenty of limited-time pandemic-related credit card offers:
Extended time frames to earn sign-up bonuses.
Statement credits that took the sting out of otherwise high annual fees, or credits toward purchases at specific merchants.
Bonus rewards on groceries, streaming subscriptions, food delivery and other stay-at-home purchases.
The ability to redeem travel points toward nontravel purchases at the same value per point.
There’s no telling when things will return to normal, or what “normal” will even look like later in 2021. But as the year progresses, some of these limited-time perks may be quietly eliminated in favor of benefits that are tailored toward consumers who are itching to get back out into the world.
Here are five trends to anticipate in 2021:
1. Contactless payments will continue to evolve
The world we live in now is one of elbow bumps and those metal hooks you can carry around to open doors. Naturally, this touch-averse mentality extends to what was already viewed as germ-infested: money. Before, contactless technology was a convenience. Now it’s a necessity.
Credit card issuers in the U.S. were already adding contactless capabilities to credit cards before the pandemic, but consumers’ desire to touch as little as possible while shopping has accelerated the adoption of the technology. According to an April 2020 American Express study, 58% of consumers who have already used contactless payments said they’re more likely to use them now than they were before the pandemic. In a Mastercard study also from April 2020, 79% of consumers worldwide said they were using contactless payments.
Imagine a refrigerator that notices when you’re running low on groceries and orders them for you, a washing machine that senses when you’re due for another bottle of detergent, or a car dashboard where you can order takeout or pay for gas. This isn’t the first time we’ve heard of the possibility of this technology, but the pandemic has increased consumer demand for creative ways to transact without leaving your home or car. (Maybe in 2022, we’ll finally get those jetpacks.)
Increasingly, you are your own form of identification. Your face or fingerprint is all you need to access your smartphone, for example. This technology will spread to retail and banking transactions. Here’s one way it’s becoming reality: In September 2020, Amazon introduced Amazon One at select Amazon Go store locations, allowing customers to tie their phone number and credit card information to the palm of their hand. The system is contactless — you simply hover your hand over a sensor.
Perhaps you’ll no longer need to reach for your analog or even digital wallet to buy something. Instead, point-of-sale systems and public transit turnstiles will identify you and your method of payment as you glance at a red dot or wave your hand.
If that sounds a bit creepy to you, others likely feel the same way. It will take time for consumers to warm up to the idea of virtual credit cards metaphorically embedded in their bodies.
“Not everyone wants a retinal scan done on them every time they make a banking transaction,” says Richard Goldman, CEO of Competiscan, a company that tracks and analyzes direct marketing activity. “That might be too ‘Minority Report’-ish," referring to the popular sci-fi story and film that imagines similar technology.
2. Travel cards will return to their rewards roots — with a twist
With travel off the table for many last year, travel rewards credit cards quickly overhauled the list of ways you could redeem points and miles. Suddenly, you could use rewards to cover the cost of groceries, restaurant takeout and streaming service subscriptions, or apply statement credits toward the cost of home workout apps and programs.
But in the latter half of 2021, it's possible we may feel more comfortable venturing out again thanks to promising vaccine news, so expect some of these temporary perks to slowly disappear. Travel credit cards will likely return to their original purpose, with attractive sign-up bonuses to win over Americans who are ready to book a vacation.
But travel cards won’t just aim to get you on a plane or in a hotel at a reduced price. Goldman predicts we’ll see cards amplify high-end experience offers, like cooking or restaurant experiences, that you can book using points and miles. Combining exclusive experiences with travel will be a way to make a long-awaited vacation that much more special.
3. This will be the dawning of the age of the 'alternative' card
For consumers who are new to credit, or who are rebuilding their credit, credit card options have historically been pretty limited. Secured cards have been the traditional choice, but many of them charge annual fees on top of an initial cash deposit, and with a few exceptions — like the Discover it® Secured Credit Card — these cards don’t offer rewards.
But alternative cards, which can use nontraditional underwriting methods when reviewing applications, are becoming an increasingly attractive option for many.
Cash-back rewards, even for newbies
More and more, starter cards are rolling out cash-back reward programs rivaling those offered by more traditional cards.
The Petal® 2 "Cash Back, No Fees" Visa® Credit Card, issued by WebBank, earns up to 1.5% cash back (making on-time payments helps raise your earnings rate, incentivizing credit-building actions), while the Deserve® EDU Mastercard for Students earns 1% cash back on all purchases.
No hard credit pull required
Some fintech (financial technology) companies have announced credit cards, like Tomo and the X1 Card, that don’t require a hard credit pull as part of the application process. Instead, they can focus more on other financial information — like your income and bank account balances — when weighing applications.
New ways to extend credit
We’ll see more products that look like credit cards, but don’t act like them, which will provide new ways to extend lines of credit to consumers. We’ve already seen this with the Upgrade Cash Rewards Visa®, a credit card/personal loan hybrid product that launched in October 2019.
4. Premium cards will entice you to sign up and stick around
In 2020, it was hard to justify a three-digit annual fee for a travel rewards card when you spent most of the year commuting between your bed and your desk. But, fingers crossed, travel will come back, and with that will come sizable sign-up bonuses. When you combine a valuable bonus with other popular travel perks like airport lounge access, free checked bags and statement credits for TSA Precheck and Global Entry, it’s possible to offset the cost of an annual fee.
You may not have to do much searching for such offers on your own, either. "Major issuers will upsell and cross-sell, try and move you to a new card," Goldman says.
Typically, switching (aka "product-changing") your existing card to a higher-end version means dodging a hard pull on your credit, since it usually doesn't require submitting a brand-new application. But traditionally it's also meant going without the sign-up bonus, since, again, you're not opening a brand-new account.
But in 2021, look out for generous upgrade bonuses from issuers that want to keep your relationship going for the long term. By offering you an incentive to stay, you’re less likely to consider a premium card issued by a different credit card company.
5. Customer experience will be in the spotlight
In 2019 and 2020, we saw the launch of tech company-branded cards like the Apple Card, the Venmo Credit Card and the SoFi Unlimited 2% Credit Card, which tout app-based card management, instant access to a virtual card upon approval and other unique features.
Even traditional credit card companies are imagining ways they can update their user experience so cardholders can understand and harness the full value of their cards. Any product that doesn’t offer a seamless online and mobile experience, plus easy reward redemptions, will be left in the dust.
“If you haven’t completely thought through your onboarding and customer experience, you’re going to lose,” Goldman says. “In 2021, it has to be perfect. Someone’s out there doing it better than you are.”