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I love the holidays for so many reasons, including singing in my church’s annual Christmas production (I have secretly hoped to pursue a career on Broadway since childhood). When it comes to plastic and the holidays, though, I really look forward to our annual forecast of what to expect in the new year.
It’s certainly interesting to pick the brains of leading national experts in personal finance regarding trends that they foresee. The bigger purpose of this exercise, however, is to build consumer awareness. I firmly believe that such awareness can empower you as a consumer and help position you to take full advantage of any future trends in the card industry.
Similarly, I love to review how accurate our predictions for the current year are. On that note, let’s briefly recap our 2023 predictions:
- Credit card rewards, particularly bonuses and travel perks, will get richer.
- Cash-back cards will help consumers fight rising inflation rates.
- Card interest rates and debt will continue to rise.
- Premium card offers catering to big spenders will expand.
Overall, I believe we pretty much hit the nail on the head for most of our 2023 forecasts:
- Reward cards have remained competitive this year. Offers are constantly updating and the trend has been generally positive.
- While inflation has slowed, cash-back cards have reigned supreme in the face of economic uncertainty.
- Interest rates and card debt have reached historic levels.
- Premium card offers have remained robust. Case in point, the Capital One Venture X card, which is touted as a luxury business card, recently launched and “big spenders” are definitely the target audience.
Given this background and without further ado, let’s move on to the good stuff, namely our 2024 predictions (drum roll please)! Please note that I consulted with both our own in-house experts, as well as other nationally-known personal finance experts, while writing this article.
Cardholders will finally get relief from record-high credit card rates
If you carry a balance from month to month on your cards, 2023 has likely been a rough year for you. In fact, according to my colleague Richard Barrington, consumers are facing record card debt this holiday season.
The Feds have been aggressively raising rates in the past couple of years. In fact, there have been 11 consecutive rate hikes, including four increases in 2023.
The good news is that many experts believe we won’t see any additional rate hikes in 2024. In fact, numerous experts predict that the Feds will actually cut rates sometime in 2024 (when is anyone’s guess), which could give some much-needed relief to consumers struggling with card debt.
Ruth Susswein, director of consumer protection for Consumer Action, a consumer education and advocacy organization, anticipates card rates should be more stable in 2024.
Despite this positive sentiment, it should be noted that Susswein also cautions that card rates will probably remain at or near historic highs. Similarly, Beverly Harzog, a consumer finance analyst with U.S. News and World Report and author of The Debt Escape Plan: How to Free Yourself from Credit Card Balances, Boost Your Credit Score, and Live Debt-Free, warns that “it’s way too early to predict that rates will fall next year. The Fed looks at many factors when considering rate changes.”
Herzog adds that “we could see lower rates toward the end of 2024, but the best course of action is to pay your card balance in full every month. Do that and your interest rate doesn’t matter!”
The bottom-line consensus is that any potential debt relief in 2024 from rate cuts will be realized very slowly and will likely be limited, to say the least.
With card debt at record levels this holiday season, more delinquencies are likely to occur in 2024. According to Susswein, this scenario could “make it more difficult for consumers to obtain credit” (particularly consumers with poor or no credit score). As a result, if your credit is less than stellar, you should focus on boosting your credit score to hedge against this risk.
Balance transfer offers will remain robust, but will become harder to get
I’ve always recommended balance transfer offers as a strategy for cardholders seeking to knock out card debt. Most 0% APR offers last for around 12 months (before the temporary rate increases to the normal purchase rate), but a few currently last as long as 21 months. Such offers have been around for many years and will likely still be plentiful in 2024….with one caveat.
The caveat expands on the bonus tip above that states that it will likely be harder for some consumers to qualify for credit, particularly for those with poor credit and perhaps even fair credit. Most low-rate transfer offers have historically required good credit in order to qualify.
However, card issuers can tighten their credit standards at any time and such a tightening is likely to occur in 2024 as delinquency rates are on the rise.
Susswein advises that “those seeking a new 0% balance transfer to pay off debt next year should be confident that their credit scores are quite healthy or they may find themselves denied for the most attractive offers.”
Herzog adds that she routinely sees “really good transfer offers every January” (following heightened holiday spending). She predicts that we’ll see such offers again, but cautions that “credit has already tightened this past year, so it could be more difficult to get approved for those cards” in 2024.
Despite this negative caveat, there is a silver lining. Such offers will likely expand for those with good credit particularly if rates start to fall.
Lynnette Khalfani-Cox, author of the New York Times bestseller Zero Debt: The Ultimate Guide to Financial Freedom and affectionately known as the Money Coach, predicts that “if rates start falling, we could see more competitive offers. Financial institutions might use these offers to attract customers seeking to consolidate debt and save on interest, especially if consumer confidence improves and spending increases.”
Other factors can improve your chance of qualifying for the best offers even if credit requirements increase. Khalfani-Cox “expects that people with a solid payment history and higher incomes will be the recipients of most of the best balance transfer offers.”
Cash-back credit cards will remain king among reward cards
Cash-back cards have been very popular this year among cardholders who love rewards. As strange as it sounds, some consumers this year have even utilized cash back cards to help offset inflation. Given this background, the big question is will cash back cards still reign supreme in 2024?
Herzog seems to think so. She observes that “cash back cards seem to be popular no matter what the economy is doing, but in a time of high prices, these cards can help people save money on everyday expenses.” She expects cash-back cards to remain very popular in 2024.
She adds that the best way to save in the likely economic conditions we will face in the new year is to “use different strategies, like couponing, tracking sales and to use cash back cards at the right time to maximize rewards and savings.”
Khalfani-Cox echoes her sentiment. With inflation getting more under control, the “value proposition of cashback cards remains strong. People who’ve adapted to using them as a tool to counter the effects of inflation may continue to do so for overall savings.”
We will also likely see innovation among cash-back cards as competition remains strong into the new year. Khalfani-Cox predicts more “targeted rewards and/or tiered cash-back systems to appeal to specific consumer segments or spending patterns.”
Travel and airline credit card rewards will continue to soar
Travel spending has continued to expand in 2023 as we put the craziness of the pandemic behind us. According to the U.S. Travel Association, total travel spending growth was up 3.5% year-to-date through September. Such stats bode well for consumers who love travel reward cards.
According to Harzog, cards offering airline rewards could have broad appeal in the new year. “Travel came back strong in 2023 and this could intensify in 2024. The biggest issue is that travel is expensive, especially by air. So, travel rewards cards are likely to appeal to all consumers and not just to frequent flyers.”
Khalfani-Cox concurs. She foresees a positive outlook for travel cards. Specifically, she believes that “we could see more partnerships between card issuers and travel companies, enhanced rewards for travel-related spending, and possibly even more flexible redemption options.”
We will also likely see growth among niche travel categories, such as business travel. Khalfani-Cox predicts that “the focus might shift towards offering unique travel experiences or benefits that cater to the specific preferences of certain travelers, like frequent flyers and business people.” Similarly, Harzog foresees that “top benefits, such as airport lounge access, will improve as issuers compete with each other for the market.”
Despite the bullish outlook, there are a few areas of concern according to Harzog:
- Elite travel cards that cater to big spenders and that offer premium benefits may be more difficult to get.
- The definition of who gets access to airport lounges may narrow, which we’ve already seen happening in 2023.
- Sign-up bonuses, most notably free frequent flyer miles, will remain generous. However, bonuses may not be as generous as they have been as issuers try to deal with higher card delinquencies.
- Annual fees may increase as issuers try to offset costs.
Given all the problems that occurred this year in the travel industry, such as flight delays, savvy consumers should look for cards offering travel protections, such as travel insurance.
Other brief, fun predictions by our experts
Herzog points out that card issuers are already using AI in a variety of ways, especially with fraud detection, such as when a cardholder’s spending pattern suddenly changes. AI is also being used for market research and even for underwriting activities, such as setting card rates and credit limits.
Going forward, Khalfani-Cox opines that we might see more personalized card offerings, enhanced security features using AI, and even more seamless integration of credit cards with digital wallets and mobile payment platforms. AI could also play a significant role in fraud detection and in offering tailored financial advice to cardholders.
Credit card late fees will be capped at $8 (down from $30 for the first offense, $41 thereafter).
Susswein believes an historic cap on late fees could happen in 2024. She observes that the Consumer Financial Protection Bureau (CFPB) proposed capping late fees earlier this year. While no one chooses a card based on late fees, if this change becomes permanent card issuers have threatened that it could impact rewards programs, reducing perks and benefits. It’s probably more likely to hurt those who are borderline eligible for new credit.
Eco-friendly card options will become more prominent, replacing the “glitz and glamour” associated with cards made out of metal.
Khalfani-Cox predicts we will see more biodegradable or digital-only cards, as environmental concerns gain more attention.
The Credit Card Competition Act (CCCA) of 2023 will not pass due to protests by reward cardholders.
Herzog maintains that the CCCA will likely be voted on again in 2024, but doesn’t believe it will pass. The act has been very controversial from its inception. If it does pass, it could impact rewards in a negative way. It could also make annual fees go up.
I sincerely hope these predictions for the new year from our experts are helpful. I would love your feedback on how they’ve helped or any predictions you might have for 2024. Who knows, I may include a tip from you in a future article. Happy New Year!