Let's take a peek at what 2023 could bring for the credit card industry as we say goodbye to one year and hello to another.
Overall, we anticipate rising credit card debt levels and changes in the credit card categories that many customers like. However, this tendency is unlikely to alter for individuals who are strongly committed to the points and miles hobby; in this case, despite the ongoing trend of increased annual fees, people will still hunt for substantial sign-up bonuses and premium credit cards.
Additionally, we offer forecasts for what credit card issuers are anticipated to do in 2023. Here we have both good and terrible news. The most obvious example is the addition of new advantages, but we don't believe they'll be simple to use or provide the value banks promise when these benefits are announced.
At TPG, we make projections similar to this every year, and our 2022 predictions mostly came true.
Related: A look back at our trends and expectations for credit cards in 2022
What will happen in the upcoming year concerning our 2023 predictions? Let's begin.
Bonuses will still be offered, but they won't always be the greatest deals.
We've compiled data on American Express, Capital One, and Chase's welcome bonuses over the past year. We discovered that sign-up incentives that were raised or higher than usual seldom ever reached a "biggest bonus ever" level. These improved offers frequently fell well short of the highest bonus the card had previously provided.
Yes, the Chase Sapphire Reserve had the biggest bonus in five years, while the Ink Business Cash and Ink Business Unlimited credit cards also had the best incentives ever. Additionally, we saw a brief promotion on the American Express® Gold Card that gave the highest bonus ever while only being available for a few days.
However, this has not been the case in the majority of cases. In addition, we anticipate that the increased incentives in 2023 will not reach "best" levels. The Chase Sapphire Preferred Card gave a bonus that was increased in 2022, but it was not able to meet the all-time high of 100,000 points that it had previously offered in 2021. In 2022, bonuses on a variety of other cards, including The Platinum Card® from American Express and the Capital One Venture X Rewards Credit Card, were reduced.
If the trends shown over the last several years are any indicator, we anticipate that limited-time sign-up incentives in the year 2023 will not reach the levels seen in years past.
The emphasis will move from premium cards to cards with financial incentives in the solicitation of applications.
The actions shown by members of the general population and those who actively seek out rewards are not necessarily the same. We anticipate that a large number of people who are interested in points and miles will continue to apply for travel rewards credit cards so that they may check trips off their bucket lists.
The average customer, on the other hand, could go in a different direction in 2023. Many customers may opt for credit cards that provide cash back, advantageous debt transfer conditions, or an initial 0% annual percentage rate for 12 months or longer in the coming months because they anticipate future financial uncertainty. In addition, there is a chance that secured credit cards may once again become popular, which may be connected to the next trend that we anticipate appearing shortly.
The amount of debt carried on credit cards will rise.
According to the information provided by the Federal Reserve, the amount of revolving debt in the United States, which includes debt carried on credit cards, grew during the year 2022. Every quarter of 2022 saw an increase in revolving debt that was greater than the level that existed during the same period in 2021.
Unfortunately, we anticipate that this pattern will persist, which will cause the previously noted change in consumers' attention to balance transfer and 0% APR credit card offers. The average person's priority will probably be paying off debt rather than obtaining significant sign-up incentives to use toward travel.
The same is true for proprietors of small businesses. According to a J.D. Power poll, the percentage of people reporting credit card debt increased 5% from 39% to 44% over the previous year.
People in this scenario will find it increasingly challenging to get authorised for a new credit card as their credit card debt grows. That will spark interest in secured credit cards, enabling individuals to establish a good credit history and receive incentives along the road through secured cards.
Interest rates are rising, which makes the issue worse. Paying off debts gets increasingly challenging as amounts increase and interest rates increase. Additionally, it serves as further evidence that using credit cards to borrow money is not a smart idea and that responsible credit card use will be crucial this year.
Intensification of "buy now, pay later" options and usage
The demand for "buy now, pay later" services will rise as customers take on more credit card debt. As a result, more banks will provide these services to draw in clients.
For instance, a customer using a credit card to make a $1,000 purchase would accrue an extra $93 in interest over a year while paying off the debt. Carrying a debt might hurt this person's credit score because the amount and payment history would be shown in their credit report.
Related: An analysis of the leading "buy now, pay later" services, along with warning signs
Instead, by using these programmes, such as American Express Plan It and My Chase Plan, you may set up a payment schedule without having to pay the high-interest charges that credit cards usually put on when you don't pay the balance in full each month. Yes, utilising these services still results in some kind of charge or interest over time, but it's probably less than the APR on the credit card. These services will continue to be well-liked by those who must spread out their purchases over several months or years.
Less interest in cryptocurrency-generating cards
We anticipate a decline in demand for credit cards that provide bitcoin incentives after the alleged crypto meltdown of 2022. Customers who spend cash on regular transactions will continue to be leery of obtaining cryptocurrency incentives like bitcoin and Ethereum.
In its place, customers will stick with tried-and-true credit card options. This includes those seeking credit cards with good sign-up bonuses for travel rewards as well as the general public using the credit card options mentioned above.
Like to earn cryptocurrency on your credit cards? What you should know is as follows.
The usual going forward is 2% cash back.
The norm for cash-back credit cards is "2% back on all purchases," according to our expectations. While cards like the Citi® Double Cash Card and even the Capital One Venture Rewards Credit Card, which offers 2 miles for every dollar spent, have been available for a while, it will get harder and harder for credit card issuers to attract new customers with cards that offer rewards rates of less than 2%. Consumers will naturally want to earn as much cash back as they can on each transaction if they are expecting to earn cash back in the upcoming year.
The top credit cards with 2% cash rewards
Annual costs will keep increasing.
Credit card annual fees will increase in the future. But how high will they ascend? When will customers have had enough and order credit card companies to cut back on these fees (and the benefits the cards tout as justification)? Although we cannot be certain, we do not believe that 2023 will hold the key.
Do premium credit cards merit their yearly fees?
The annual fee for American Express's Platinum Card increased to $695 in 2021 from $550. (see rates and fees). Additionally, the Chase Sapphire Reserve's annual fee increased in 2021, going from $450 to $550. The Business Platinum Card® from American Express' annual fee increased from $595 to $695 in January 2022. (see rates and fees). The annual fee for the Marriott Bonvoy Brilliant® American Express® Card increased from $450 to $650 in September 2022. (see rates and fees).
Yes, card issuers have improved the advantages offered with these cards to make up for the higher annual costs. Many of these advantages, though, need time and effort to fully enjoy. These advantages just can't make up for the yearly fees on premium rewards cards for many people.
Related: Credit card advantages and bonuses you should be utilizing each month
This leads to a logical follow-up inquiry: Which cards will see charge increases? Although we (obviously) cannot say for sure, we believe that at least one premium credit card will raise its price to keep up with rivals' actions.
More specialty and partner goods
Last year, there were a lot of cooperation opportunities between credit card issuers and businesses outside the conventional credit card industry, making it difficult to keep track of everything. To emphasise the argument, let's look at a few examples.
In 2020, Chase established a collaboration with DoorDash, and then extended these advantages until 2024. The Instacart Mastercard was introduced by Chase in the middle of last year, along with additional perks for certain customers who use Instacart. Additionally, the issuer extended its association with Lyft until March 2025 and later introduced Lyft Pink privileges for owners of Sapphire Reserve cards.
Wine.com, Goldbelly, and Milk Bar are three examples of companies that were absent from the market for credit cards until 2022 when they were added to the list of approved dining merchants for the American Express Gold Card. In addition to creating agreements with Walmart+, Equinox, Soul Cycle, and other businesses in recent years, American Express also formed these new alliances.
In addition to that, this does not even take into account goods such as the Apple Card, Uber Credit Card, and Starbucks Rewards Card (though this is no longer accepting new applications).
We anticipate that such agreements will continue throughout the next year. Credit card issuers will turn to new partnerships as a method to boost income and provide perks to credit cards in the hopes of persuading customers to keep their credit card accounts active and make purchases using their cards. This will result in the card issuer receiving greater money.
Fewer travel advantages tied to corporate travel
Although leisure travel has shown signs of improvement, the recovery of corporate travel has been stagnant. It remains behind the pace set by leisure travel, and we anticipate that as a result, credit card issuers will respond by providing fewer incentives connected to business travel.
We anticipate that card issuer will try to convince company owners to keep their credit cards open by offering benefits that are unrelated to travel on business credit cards rather than adding travel perks to business credit cards.
Additional free memberships as well as credits that are difficult to redeem
On the other hand, utilising those additional benefits that come through partnerships is not always an easy task. This results in breakage, which is the process by which retailers and merchants generate income from underutilised incentives, such as the residual value on gift cards or other perks that are not redeemed.
Think about how the Amex Marriott Bonvoy Brilliant went from being an easy-to-use annual credit of up to $300 at Marriott hotels to a less consumer-friendly monthly meal credit of up to $25 each month. This change occurred when the credit was converted from an annual credit. Customers may have a difficult time realising the full benefit of this without incurring additional costs because it now requires a monthly payment, which makes it more difficult for them to use.
The same may be said about the various advantages that come with credit cards but are paid out in monthly, quarterly, or semiannual payments rather than annual credits. In the year 2023, we anticipate seeing more of this.
Card issuers will sometimes add benefits for subscriptions to services such as streaming, meal delivery, or other services, and they will claim that these add a particular dollar amount of value to the card on an annual basis. However, because of the difficulty associated with making use of them, the value that they provide to cardholders might vary substantially. There is also the reality that a significant number of consumers will make advantage of these benefits just "because they're accessible," and not because the benefit offers the customers real financial savings.
In 2022, customers will search for travel coverage after experiencing headaches.
Consumers have a negative impression of airlines as a result of the travel mayhem that occurred during the summer as well as the breakdown that Southwest had around the holidays. During this process, we were inundated with emails requesting information and assistance at various points. We showed users how to use AirTags and other Android-based solutions to track their luggage, but many individuals who travel frequently are searching for ways to improve their experiences on future journeys.
In 2023, we anticipate that consumers would ask for more safeguards when they travel. This indicates that individuals will look into purchasing a reliable travel insurance plan or opening a credit card account that offers this advantage. People want to know that any additional expenses they have to pay as a result of difficulties such as delays, cancellations, lost luggage, or any other issue would be repaid to them. After the disruptions in the travel industry that occurred in 2022, these advantages will become increasingly important and widespread.
Related: the top credit cards that offer comprehensive travel coverage
Access to specialised markets and goods that impose expenses on card issuers would be eliminated.
Regrettably, we also anticipate a continuing decline in benefits, which will result in increased expenses for credit card issuers. A current illustration of this would be the fact that holders of the Capital One Venture X Rewards Credit Card get access to Priority Pass lounges (including unlimited guest privileges). On the other hand, as of January 1, they no longer had access to perks that were not associated with the lounge, such as restaurants and spas.
In 2019, American Express also discontinued these advantages that were not associated with lounge access.
In 2023, we anticipate that companies that issue credit cards will work to lower the fees associated with accessing specialised items. The most obvious illustration of this principle is provided by Priority Pass restaurants; nevertheless, it also applies to transfer partners for credit card points. You will no longer be able to transfer points from Citi ThankYou to Malaysia Airlines Enrich as of the 29th of March, 2022. Because of the low volume of transactions including this transfer option, Citi most likely determined that the costs of continuing the relationship were no longer justified.
You should prepare yourself for credit card issuers to assess transfer partners that are used less frequently and seek ways to delete them to save money.
An increasing number of cardholders will work their way up to elite status through spending.
It is feasible to spend your way toward elite status using credit cards in numerous loyalty programmes – both for hotels and flights. This may be accomplished by making purchases. In 2023, we anticipate that a larger number of people will take use of this benefit.
Some people can charge significant quantities of money to their credit cards, but they do not have the time to take part in mileage runs or travel to acquire status by travelling. Local companies will likely want to move their spending onto credit cards that provide them with the benefits associated with elite membership.
The transition that American Airlines has made to using loyalty points is the most visible illustration of the popularity of this service. Obtaining status by flying solo is becoming an increasingly challenging endeavour. On the other hand, if you can spend the necessary amount, achieving status through credit card spending alone (with little or no travelling involved) has become quite simple in recent years.
We believe that this is a portent of things to come, both the cause and the impact of whatever is going to happen. Consumers who use credit cards with co-branded logos are helping credit card issuers and loyalty programmes generate money, and they will be rewarded for their participation.
To view the costs associated with the Amex Platinum card, please click here.
Please click here to view the Amex Business Platinum card's pricing and fee schedule.
Simply click this link to view the Amex Marriott Bonvoy Brilliant card's applicable rates and fees.