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Here are three credit card trends to watch for in 2021

Credit may be more expensive and harder to come by

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Photo (c) Luis Alvarez - Getty Imgaes
When the coronavirus (COVID-19) pandemic struck in March, credit card companies reacted almost immediately, unilaterally closing some accounts and approving fewer new ones.

Now that vaccines against the virus are rolling out and an end to the pandemic is in sight, what credit card trends are in store for 2021? CardRatings.com has issued a new report listing some of the changes consumers can expect in the coming year.

Among the trends, the company’s analysts believe it will continue to be a bit harder to open a new credit card account. When accounts are approved, they may also have smaller credit limits. That’s because credit cards are unsecured debt, meaning the lender has no collateral in the event that the consumer can’t pay. With unemployment still high and the economy still uncertain, lenders can be expected to show some caution.

"Thankfully, with the recent vaccine rollout, there's reason to be hopeful the economy – and credit card approvals – bounce back sooner rather than later," said Brooklyn Lowery, senior managing editor for CardRatings

Shifting rewards

In the meantime, there could be less available credit in the consumer economy. Small businesses may find they’re making fewer sales. On the other hand, the just-signed stimulus bill may help by putting money in consumers’ pockets.

Travel rewards cards are getting much less use during the pandemic, so lenders are finding alternative ways to reward cardholders for using them. One example is the Chase Pay Yourself Back program that allows consumers with the Chase Ultimate Rewards card to redeem points for several categories of everyday purchases. 

That perk was announced as a "limited time" feature earlier this year, but it has already been expanded to additional cards and extended into 2021. CardRatings analysts say the program could even become a permanent feature as banks try to retain cardholders while attracting new ones.

Rising rates

A third trend to watch for in the coming year is rising credit card interest rates. Rates have been stable and even declined some during the pandemic because the Federal Reserve has essentially cut a key interest rate to 0 percent.

CardRatings analysts don’t expect that trend to continue. Bond yields are already beginning to show some signs of life, and credit card rates could soon rise as well, especially as the pandemic begins to end.

"Historically, interest rates tend to go up as the economy improves," Lowery said.

That’s why consumers should start now paying down credit card balances. In the future, more of the monthly payment may go toward just paying interest.

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