I’ve been spending some time gazing into my credit card crystal ball, and I’ve noticed a few trends on the horizon. And don’t worry – they’re actually positive trends!
Before the COVID-19 pandemic hit in early 2020, the economy was doing well. But the pandemic ushered in shutdowns and unemployment during 2021. However, the Bureau of Labor Statistics reported that unemployment was only 4.2% at the end of November 2021. This marks an improvement over November 2020, when the rate was 6.7%.
We’re still contending with inflation, and I don’t think it’s going away anytime soon. But in spite of that, I still see four positive trends for you and your credit cards in 2022:
- Credit card offers will increase and expand to the subprime market.
- Consumer credit card debt will increase.
- Balance transfer credit cards will make a comeback.
- Credit card issuers will embrace buy now, pay later options.
Credit Card Offers Will Increase and Expand to the Subprime Market
Card issuers have recently been sending a lot of credit card offers to consumers. And some cardholders have reported getting credit limit increases without even asking, which sounds awfully nice of issuers. But before you send a thank-you note to your credit card company, be aware that the motives of the card companies aren’t exactly altruistic.
They see consumers venturing into stores and spending again, and they want your business. Every time you make a purchase, the credit company gets a transaction fee. Plus, if you carry a balance, they get to charge you interest.
In 2020, due to the pandemic, credit was tight, which means it was difficult to get approved for a credit card or to get a credit limit increase. For those who have subprime credit, it was difficult to get through the pandemic without access to credit.
But according to a 2022 forecast from TransUnion, the market for the subprime population will open up again in 2022. During the height of the pandemic, credit card issuers were having financial issues and weren’t willing to take on risky customers.
Even though credit will loosen, maintaining a high credit score will still be essential. A new credit card or a higher limit gives you more available credit. This can lower your credit utilization ratio, which is the amount of credit you’ve used compared with the amount you have available. The lower your ratio, the higher your credit score. So, think of increased access to credit as a safety net.
Consumer Credit Card Debt Will Increase
The most recent totals from the Federal Reserve show that consumer revolving debt, which is primarily credit card balances, increased at an annual rate of 7.8% in October 2021. Total revolving debt was $1.011 trillion in September 2021 and went up to $1.017 trillion in October 2021.
During the early days of the pandemic, Americans did a great job saving money and paying down debt. The uncertainty of both the economy and their job status motivated consumers to build an emergency fund and pay down debt.
Your personal savings rate is the amount you save compared with your disposable personal income. During 2021, the personal savings rate started slowing down. At the end of October 2020, savings had slowed to 13.6%, but that was still higher than average. To compare, in October 2021, the savings rate was just 7.3%.
If you’re still trying to get out of debt, you’re in luck if you have a good credit score. Balance transfer credit cards are on their way back, and using one of these cards is a great way to get rid of debt.
Balance Transfer Credit Cards Will Make a Comeback
During the second half of this year, it’s become easier to get approved for a balance transfer credit card. Earlier this year, credit card issuers had offered hardship programs to many Americans who couldn’t pay their bills due to the impact of the pandemic, so the issuers limited their risk in other areas. The issuers cut back on balance transfer offers and implemented lower credit limits.