As the new year approaches, consumers can look forward to increased travel perks, new partnerships, better terms from their credit cards and other financial changes. With NerdWallet’s predictions for 2014, there’s a lot for consumers to be excited about come January 1.
1. Expect more perks
Last year, a number of high-end credit cards began offering partnerships with other products, from free FICO scores on some Barclaycard cards to Amazon Prime memberships with the American Express Blue Cash credit cards. In 2014, more credit cards will offer such perks as issuers look to distinguish themselves in an increasingly competitive market.
2. “Top tier” benefits will be more accessible
Typically, top-notch credit card benefits like concierge service were available only with the most expensive offers. We’re starting to see those perks become available on lower-cost cards. For example, the GM credit card has no annual fee and delivers the perks of a World Elite MasterCard, such as free upgrades on some international flights; the Barclaycard Arrival™ World MasterCard® gives trip cancellation insurance, concierge service and more. Look to see these perks expand further as banks try to entice less heavy spenders.
Consumer tip: If you have the credit for it, consider signing up for one of these no-fee credit cards to make travel and shopping easier without paying a high cost.
3. Credit scores will become more realistic
The traditional credit score has been out of touch with reality for quite some time. It rewarded consumers with a history of borrowing, rather than a history of staying within their means. This year, TransUnion joined Experian in factoring rental payments into credit scores when possible. We expect to see the calculations of credit scores expand to be a better proxy for creditworthiness.
4. 0% APR periods will lengthen – and be available on more cards
Between 2010 and 2013, the average 0% APR balance transfer offer on credit cards grew from 8 months to 11 months as banks loosened their purse strings and expanded credit to less-than-prime consumers. Watch for that trend to continue as banks try to poach other lenders’ customers with tantalizing offers.
Consumer tip: Be wary – a 3-5% balance transfer fee can wipe out any savings on interest rates.
5. Alternative lending will become mainstream
Since the Great Recession, there’s been a gap between lenders and potential borrowers whose financial statements don’t fully reflect their ability to repay. This is particularly prevalent in small business lending, where creditors typically want to see years of solid financial statements before making a potentially risky loan. Here, startups are taking advantage of big data to form a more complete picture of businesses’ creditworthiness. Kabbage, for example, takes into account shipping records and social media; On Deck Capital looks at cash flow and payments to vendors and suppliers. Recently, LendingClub announced that it would venture into small business lending, too. Look for the “alternative” lenders to become more common as the traditional criteria for lending are expanded.
Consumer tip: Unless you’re a savvy investor, don’t dip your toes into peer-to-peer lending to boost your returns just yet. This is still untested territory for someone looking for a place to park their cash.
6. Banks will play the role of educator
As banks continue to look for ways to strengthen their brand, expect to see them invest more in financial education for customers, as well as the public.
Many local institutions, particularly credit unions, have been doing this for awhile via blogs and online resource centers. In 2013, we saw much larger players entering the space. Bank of America launched BetterMoneyHabits.com, a joint venture with Khan Academy, and PNC developed a series of “Achievement Sessions” featuring prominent instructors from the personal finance world.
7. Black Friday will run the entire month of November
In 2014, the influence of Black Friday will continue to run strong, but the actual Friday after Thanksgiving will become increasingly insignificant for retailers and consumers. Retailers will continue to push the holiday shopping season earlier in the year and compete to be the first to get shoppers’ dollars.
Consumers will see bigger and better offers earlier in the season, but Black Friday will likely not have the best doorbusters and deals of the season. For diehard Black Friday enthusiasts, 2014 will offer another year of evidence that online shopping – which lets retailers change prices on a whim – has fundamentally taken away Black Friday’s status as the best day for deal extravaganzas.
8. Most brokerage firms will support social investing
Getting started investing can be daunting, so some innovative online brokers have begun allowing users to connect and share trade ideas. TradeKing was the first broker to create an online trading network in 2005 and the social trend has since spread. eToro, a firm specializing in foreign exchange, has grown its community to over 2.75 million users since the company started six years ago. Ditto Trade actually lets you view members’ trade history and invest alongside them. Every year, more brokers have been catching on to the popularity of social investing, and in the next year it will spread to most major firms.
9. Use-based car insurance will grow more popular
To find savings in car insurance, more drivers will explore use-based or pay-as-you-go car insurance, which requires using a telematics device to measure driving habits and mileage. Drivers will be rewarded with savings and discounts for keeping their mileage low and driving at safe speeds. Parents can also use a telematics device to help teens drive carefully, receiving alerts when their teens are texting and driving.
The average number of miles Americans drive to work is on the decline, so use-based insurance will grow in popularity. Insurers will also continue promoting telematics devices, because they provide real-time, location-based information to help them analyze risk factors and driving habits in different areas.
10. Life insurance will be made easier
Life insurance policies will become simpler and more readily available to address the lack of life insurance among millennials and Generation X. Policies will become more accessible and easily managed on mobile devices to appeal to tech-savvy age groups that are on the go.
As insurers reach for broader markets, they’ll continue to cut out the middle man and sell directly to consumers at big retailers. Aetna life insurance policies can now be bought at Costco and MetLife policies can be bought at Walmart, making such coverage more common and easy to buy.
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