Credit card rewards expected to improve in 2018

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Industry analysts says the competition among lenders is heating up

Consumers applying for a credit card in 2018 will have even more attractive options as the industry's competition for customers shows no signs of letting up.

Last year saw an increase in rewards and a decline in fees. Thomas Donaldson, Senior Credit Specialist at CompareCards, predicts credit card perks will get even better in the months ahead.

"Heading into 2018, the credit card landscape is more competitive than ever as issuers compete for the number one spot in consumer’s wallets," Donaldson told ConsumerAffairs. "When banks compete, consumers win."

Cash is king

Because cashback credit cards are so popular with consumers, Donaldson says banks will issue more of them, with increasingly generous rewards. Banks are also creating travel rewards structures that mimic cashback programs.

The Discover it -- Cashback Match card pays five percent cash back at different places each quarter like gas stations,, grocery stores, restaurants, or wholesale clubs up to a maximum level each quarter. It pays one percent on all other purchases.

The Chase Freedom card is another popular cashback choice. It pays five percent cash back on up to $1,500 in combined purchases in bonus categories each quarter. The cardholder sets the categories based on his or her spending priorities.

Because consumers racked up an estimated $43 billion in holiday debt, the most valuable rewards credit card may be one that lets you transfer a balance from another card and pay no interest for an extended period.

Better balance transfer offers

Donaldson says the balance transfer offers are getting better in 2018. So far this month, there are more cards offering a $0 introductory fee for balance transfers and zero percent rates for over a year.

For consumers making payments on a $10,000 credit card balance at 17 percent interest, the savings would amount to around $140 a month.

"Since the Fed started raising rates at the end of 2015, the average interest rate on outstanding credit card balances has increased 86 basis points, according to a CompareCards analysis of Federal Reserve data," Donaldson said. “That represents $7 billion in extra interest owed this year for Americans who carry a balance on their credit card."

The Fed is expected to raise rates as many as three times in 2018, meaning interest charges are likely to go even higher. That makes a balance transfer card even more attractive.

The BankAmericard offers a 15-month zero percent introductory period if balances are transferred in the first 60 days the account is open. It also waives the three percent balance transfer fee if the transfer is made in that 60 day window.

"Banks are sweetening the balance transfer deal for consumers looking for a way out of credit card debt," Donaldson said. "More cards offer $0 intro fees to transfer a balance and longer zero percent intro APR. That gives people a more cost-effective way to pay down debt without new monthly interest piling up."

Donaldson says 2018 will also see improvements to loyalty programs, as banks try to keep their current customers happy. That means consumers might not have to apply for a new card this year in order enjoy added rewards.

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