2017 may become known as the year of the premium credit card, given that U.S. Bank, UBS and Bank of America sought the same success with the Altitude Reserve, Visa Infinite, and Premium Rewards cards—respectively—that Chase found last year with its Sapphire Reserve card. The race to the top came as credit card debt hit record highs and delinquencies began to inch up. What does 2018 portend?
Here are four trends to look for next year:
Lyft-off? New or improved co-branded credit cards
The power of ubiquitous brands to sell just about anything has never been stronger, and we expect to see that marketing muscle continue in credit cards. Following Uber’s credit card with Barclays, launched in October, more big-name brands may follow by launching their own cards in 2018.
Other brands may expand on their existing suite of cards like PayPal did earlier this year when it debuted its cash-back card and Amazon, which offered a new Visa Signature card for just its Prime members with a higher rewards rate for Amazon purchases.
What to look for: Among other likely launches, Uber rival Lyft is rumored to have credit card plans in the making. Starbucks is partnering with Chase to offer a rewards Visa card sometime this winter, the company CEO announced in a November earnings call.
“Still, don't be blinded by loyalty to your favorite brand,” says Robert Harrow, ValuePenguin’s credit card analyst.
Be careful not to let the buzz of a big brand’s card launch make you buy a card you don’t need. While the rewards rates or other perks may improve on older co-branded credit cards, evaluate the card like you would any other, says Harrow. You’ll likely get the most rewards from your everyday spending by signing up for a generic cash-back card, and the interest rate will likely be lower—an important consideration if you carry balances. That said, co-branded cards make for a good secondary card to keep in your wallet, Harrow says.
Higher debt, more people transferring balances
Total outstanding credit card debt continues to hit a new peak every month, with no signs of the trend abating. More American households are rolling that debt from one month to the next than before the recession, and the number of open credit lines is set to soon surpass the previous high in 2008.
Higher interest rates will only exacerbate the debt burden in 2018. The Federal Reserve is expected to raise a key benchmark rate by three-quarters of a percentage point by the end of next year. That will immediately boost interest rates on most credit cards and make paying off any balances that much harder.
What to look for: This is more reason to consider a balance-transfer card, which offers low or no interest on an existing card’s balance. Harrow expects more people will turn to balance transfer cards to help pay off their ballooning debt. Already, Google searches for “balance transfer credit cards” have similarly increased in sync with U.S. debt levels.
But Harrow says the cards might be more scarce and less widely marketed than in lower-interest rate environment of 2016 and 2017. ”Banks aren’t too happy with these cards because they can attract gamers. They’d rather market rewards cards,” says Harrow. “So while balance transfer cards will be popular in 2018, I doubt we’ll see banks really getting behind them and pushing these offers in the same way rewards cards will be promoted.”
More simple cash-back rewards
Americans love their rewards. But many don’t want the hassle of remembering which card is best for groceries and which they should use restaurants. They also want to avoid the burden of registering their card each quarter for a new rewards category to get a higher rewards rate.
That’s why cards with a fixed rewards rate are becoming all the rage, says Harrow. Both Barclays and Discover mentioned at an industry event that consumers that like the simplicity of a card that gives 1.5% or 2% back on all purchases.
What to look for: Cash back cards that kept it simple were “the most popular types of cards that launched in 2017, so we will likely see far more of that next year,” Harrow says. “There’s no need to think about categories, or plan around how to optimize.” Still, it pays to consider all cash-back cards, even the more complex ones, because their overall rewards rate or sign-on bonus may be too generous to pass up.
More flexible hotel rewards?
Hotel loyalty programs with the highest marks are those that let members to redeem rewards for dining, product purchases and special events, according to this year’s J.D. Power 2017 Hotel Loyalty Program Satisfaction Study.
Hilton HHonors is a prime example. The program this year introduced several new features including points pooling, booking stays with a combination of points and cash, and allowing members to pay for their Amazon purchases with Hilton points.
What to look for: Marriott has a similar occasion in 2018 to revamp the Starwood loyalty rewards program when it introduces new credit cards for the hotel chain it acquired earlier this year. The interesting twist? Both American Express and Chase—which has its own deal with Marriott—will reportedly be issuing co-branded Starwood cards. AmEx will offer the super-premium and small-business cards and Chase provide the mass-consumer and premium-consumer cards. The cards are all due out next year.