In 2020, the coronavirus pandemic brought a huge shift in spending as the country shut down. The travel industry specifically took a hit, and many card issuers responded by adding rewards on everyday spending to travel cards.
While I think travel spending will eventually rebound in 2021, it seems likely that the additional perks on everyday spending are here to stay.
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Early on in the COVID-19 pandemic,Â many card issuers pivotedÂ to grocery spending, food delivery and takeout, streaming services, home improvements, and other everyday spending categories out of necessity. In 2021 and beyond, I think theyâll do so by choice.
These perks really seem to be resonating with consumers, whether weâre talking about earning bonus rewards for these types of spending, redeeming points or miles at a higher than normal ratio to offset related purchases, receiving free premium memberships for services such as DoorDash and Instacart, or getting statement credits to defray eligible costs.
It all adds up to cash back with a twist. Thereâs an experiential component that cardholders love and habitual aspects that appeal to card issuers trying to build loyalty. If youâre more likely to use a card that offers these perks â especially if youâre willing to pay an annual fee â thatâs a win all around.
See related: Guide to Chase Pay Yourself Back
Necessity is the mother of invention, of course, and the fact that the pandemic crippled travel led to many of the aforementioned incentives. I expect travel to bounce back in a big way once we have widespread vaccine availability. Late Q2 or early Q3 seems like a good bet, according to health experts.
This should unleash an incredible amount of pent-up travel demand. People want to see their families and friends, they want to explore bucket list destinations and many will have money (and points and miles) to burn after a year of lockdowns.
I expect the good deals will last for a while because itâs a competitive industry, and business travel should remain depressed longer than leisure travel. Airlines will want to pack planes, hotels will want to fill rooms and cruise lines will be especially desperate for business. We should see favorable prices along with other incentives to liquidate rewards and sign up forÂ travel credit cards.
In 2020, lenders became much more risk-averse as the pandemic created a ton of uncertainty and job losses. In Q2, 72% of credit card issuers tightened their approval standards and 0% eased them, according to the Federal Reserveâs Senior Loan Officer Survey. In Q3, 31% tightened and 4% eased. A similar trend played out with respect to existing cardholdersâ credit limits.
This hitÂ balance transfer cardsÂ the hardest. According to Mintel Comperemedia, card issuers sent 42% fewer direct mail advertisements for 0% balance transfer cards in the first three quarters of 2020 when compared with the same period in 2019. Card issuers were worried enough that their existing customers wouldnât pay them back; taking on new customers with existing debt wasnât particularly appealing.
This will hopefully turn around in the second half of 2021, assuming we have widespread vaccine access and a better economy and job market. I think balance transfer cards will be the last card sector to bounce back, however.
sign-up bonuses. But approval standards will likely remain tight as issuers look for the most creditworthy and affluent applicants. We saw some of this in late 2020, like the 100,000-mile Capital One Venture Rewards Credit Card bonusÂ (since expired) which required $20,000 of spending within the new cardholderâs first 12 months.
I think particularly lucrative bonuses will become more widely available and less restrictive in the second half of 2021. Early in the year, the best offers will probably be reserved for those with high credit scores and high incomes.
A couple of pleasant surprises this year: Credit card debt and delinquencies both fell in 2021. Credit card debt declined 11% between February and October, according to the Fed. This could be due in part to the government stimulus package passed earlier this year or consumers spending less and prioritizing paying down debt.
While weâre all anxious for our lives to return to normal, carrying less credit card debt would be a good habit to hold onto after the pandemic is over.
Have a question about credit cards? E-mail me atÂ firstname.lastname@example.orgÂ and Iâd be happy to help.