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As another year fades into memory, it is only natural to look ahead, wondering what the next one holds.
Here’s a look at some of what I expect to see in what could be another eventful year in the credit card business.
- The glory days of credit card skimming are coming to an end
- Higher annual fees, especially with high-end cards
- Keeping your card at the dinner table
- More record card debt
- Eroding consumer confidence
- Balance transfer cards will still be golden
- Credit card perks will continue to evolve and be whittled away
The glory days of credit card skimming are coming to an end
Gas stations have been the low-hanging fruit for fraudsters for years because they weren’t required to update their point-of-sale terminals to accept EMV or chip credit cards back in 2015 like most other merchants.
There were legitimate reasons for allowing gas stations to delay the implementation. For one, most stations had to completely replace their gas pumps in order to change their payment terminals, making it a far more costly and time-intensive process than it is for your typical retailer. However, it has had major ramifications.
Since gas station payment terminals can’t take advantage of the fraud-resistant technology in the new cards’ smart chips, credit card skimming — a form of fraud in which bad guys insert a small device in the card reader to capture a credit card’s pertinent information from its magnetic stripe – has continued nearly unabated. Virtually every city of any size has dealt with this type of crime in the past five years, much to the frustration of consumers.
Hope arrives in 2020, however. Gas stations must upgrade their terminals by October to meet deadlines set by the major credit card networks. Those that don’t upgrade in time will be financially liable for any fraud that occurs as a result of their not being able to accept chip credit cards. (Currently, the credit card issuer typically bears that responsibility.) That’s the same deal that other retailers faced five years ago, and it is a major financial incentive for gas station owners to act.
Does this deadline mean credit card skimming will go the way of the dinosaurs in 2020? Certainly not. There will be plenty of gas stations that miss the deadline, just as many retailers did in 2015. (An August 2019 survey by Conexxus reported that just 42% of the retail fueling industry said they already are or will be 100% switched to EMV-ready terminals or will be by the Oct. 1, 2020 deadline date.)
That means that there will still be opportunity for fraudsters to continue skimming well into 2021. However, those opportunities should be fewer and further between, meaning that the peak of the credit card skimming business will likely be in the rearview mirror by this time next year.
Higher annual fees, especially with high-end cards
The news about the Chase Sapphire Reserve® increasing its annual fee while adding new benefits from Lyft and DoorDash made a lot of headlines recently, but it probably won’t be the last annual fee increase we see in 2020.
It is unfortunate, but the reality is that annual fee increases are likely to happen more often in the near future. The rewards that come with these high-end rewards cards are expensive for banks, and those costs take a real toll on their bottom line. That’s why banks are likely to keep inching these annual fees higher and higher to see what the market will bear.
How much is too much for an annual fee on a high-end rewards credit card? $750? $1,000? More? That’s anyone’s guess. What I am certain about, however, is that we haven’t yet reached that point yet and that banks are likely to try to push the envelope a little more in 2020.
Keeping your card at the dinner table
Hate seeing your server walk away with your credit card after a nice dinner at your favorite restaurant? In this day of rampant credit card fraud, you’re not alone.
Anyone who has traveled to Europe and other parts of the world in recent years has probably experienced paying at the table with a credit card. In the U.S. in recent years, we have seen major chains such as Chili’s, Applebee’s and Olive Garden, install tablets that allow you to pay and order at the table. In most other American restaurants, however, the bill is still handled the old-fashioned way.
The good news is that more businesses are changing the way they handle credit cards to make sure that the card never leaves your sight. I saw it for myself in 2019 and expect the trend to continue in 2020 and beyond.
My latest tableside payment experience happened in the airport in Phoenix on New Year’s Eve. While traveling home for the holidays with my family, we had breakfast before our flight and when it came time to pay, our server brought a hand-held terminal (pictured below) to our table to pay. It was easy and convenient for everyone involved and my card never left my sight.
There are no hard deadlines or major financial incentives driving this change, so don’t expect to suddenly see these terminals everywhere overnight. But make no mistake: You will see this more and more in the future, and it is a good thing.
More record card debt
Predicting that credit card debt will rise in America is like picking Tom Brady and the New England Patriots to make the NFL playoffs. (To quote Billie Eilish, “Duh.”) It’s still worth mentioning, though.
As of October 2019, the latest month for which we have data from the Federal Reserve, consumer revolving credit balances stand at $1.089 trillion – an all-time record. In January 2010, that number was $909.7 billion. Ten years earlier, it was $615 billion.
There’s no way to know how much credit card debt Americans will hold in January 2030, but it’s nearly impossible to believe it won’t be significantly more than we have today. The only time in the past 50 years when we’ve seen a major decrease in card debt was during the global economic crisis, when card issuers freaked out, wrote off billions of dollars of debt, reduced credit limits and closed card accounts to an unprecedented degree in order to reduce their risk. From 2008 to 2011, revolving debt fell about $188 billion from its pre-recession peak of $1.02 trillion. But even with all that, it only took about six years to build that debt back up and sail past previous record levels.
Card debt likely won’t skyrocket in 2020, but it will go up. Barring a sudden, unexpected shock to the economy, I think we’ll move well past the unprecedented $1.1 trillion mark.
Eroding consumer confidence
Since the CompareCards Credit Card Confidence Index was launched in the fall of 2018, we’ve seen proof that the American consumer is still confident when it comes to paying off their credit card bills. In most months, more than 40% of cardholders have said they are very confident in their ability to pay their credit cards’ monthly statement balances in full, while 19%-20% say they are “not at all” confident.
However, consumers aren’t as confident about their credit card bills as they were a year ago. In January 2019, a record 48% of cardholders called themselves “very confident.” By December 2019, that number was 44% and had dipped as low as 38% in September.
I think we’ll continue to see those numbers erode in 2020. I don’t expect delinquencies to spike – though they will likely grow – nor do I expect confidence numbers to plunge. But, the combination of rising credit card debt, continued student loan debt and an election year that promises to be long, volatile and exhausting will likely mean that cardholder confidence will have a tough year.
After the presidential election ends and the smoke clears, it is possible we see a bump that pushes confidence numbers back up to today’s current levels, but only after we face some choppy waters along the way.
Other things we can expect to see…
- Balance transfer cards will still be golden: Since the Fed cut rates three times in the second half of 2019 and isn’t likely to raise them anytime soon, balance transfer credit card offers should be just as good (or maybe even better) in 2020 than they were in 2019.
- Credit card benefits will continue to evolve and be whittled away: While American Express made headlines by adding some useful benefits to some of their most prominent consumer credit cards in 2019, the larger trend for the past few years has been to pull back on benefits, such as trip insurance and purchase protection. That’s not going to change this year as issuers focus on their bottom line and gird themselves for an eventual economic slowdown.