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As the new decade begins, the vast majority of American credit cardholders believe the next 10 years will bring them less credit card debt and more rewards, according to a new report from CompareCards.com.
However, they’re far less optimistic about credit card fraud and identity theft, which most say will only get worse.
CompareCards asked cardholders to look ahead at the next decade and tell us what they thought would happen in relation to credit card-related topics, including debt, rate caps, rewards, identity theft, physical credit cards and more. What we found was surprisingly high levels of optimism around credit card debt and pessimism when it comes to fraud, but also a sense that, in some ways, the credit card landscape might not look as different in 10 years as one might expect.
- 8 in 10 cardholders think the new decade will bring less credit card debt.
- Nearly half of cardholders think credit card fraud/identity theft will get worse over the next 10 years. Just 22% expect it to get better.
- Nearly half of credit cardholders think they may not or won’t have a physical credit card in 10 years.
- Most aren’t confident that the new decade will bring a credit card rate cap, though men and younger Americans are optimistic.
- Most plan to collect more credit card rewards this decade, as well as use those rewards to travel more.
Overly confident about debt
Given the meteoric rise of credit card debt over the past 50 years, it’s amazing to see just how optimistic people are about what will happen with debt. Nearly half (48%) of cardholders are very confident they’ll have less credit card debt in the 2020s than in the 2010s, and another 33% are “somewhat” confident. Just 10% are not confident.
Men are more confident than women, which tracks with what we see each month in CompareCards’ Credit Card Confidence Index. Fifty-five percent are very confident, versus 39% of women. Gen Z and millennials are more confident than Gen Xers and boomers, with 58% of Gen Z and 55% of millennials saying they are very confident they’ll have less credit card debt this decade, compared with just 47% of Gen Xers and 40% of baby boomers.
Here’s the thing, though: They’re almost certainly wrong.
Since the Federal Reserve began tracking revolving credit debt in America in 1968, Americans have never ended a decade with less credit card debt than they began with. As this chart shows, it’s never even been close.
The good news is that the growth, in terms of dollars and percentages, has slowed since the economic crisis. The bad news is that it’s still growing, and it will likely continue to do so in the 2020s. My prediction, as seen in the chart above, is slower growth than in previous decades, but growth nonetheless.
There are plenty of things that could further slow that growth in the next decade. Major events, such as recession or war, would have an impact. So could demographic and cultural changes, like an increasing distaste for credit cards among younger Americans or the introduction of a new, disruptive financial tool that turns the credit card industry on its ear.
However, the most likely scenario is that no matter what happens politically, economically, culturally or otherwise, millions of Americans will still likely lean on credit in 2030 in much the same way they do today. Whether they use it to finance a new small business, pay for a home remodel or just to survive paycheck to paycheck, they’ll still use it. Perhaps fewer people will do so, but the simple fact is that credit isn’t going anywhere anytime soon.
Pessimistic about identity theft and fraud
When the topic turns to credit card fraud and identity theft, cardholder optimism vanishes. About one in five cardholders (21%) think the problem will get “a lot worse” in the next 10 years, and another 25% said it will get “a bit” worse. (On the flip side, just 22% think it will get at least a bit better.)
Older cardholders are more pessimistic. More than half of boomers (57%) think identity theft and credit card fraud will get worse in the 2020s, compared with 42% of Gen Xers, 38% of millennials and 40% of Gen Zers.
There’s also a gender divide. Half of women think ID theft and fraud will get worse in the next 10 years, while just 42% of men feel the same.
So will the problem increase this decade? It’s entirely possible. At a minimum, it will continue to evolve. We clearly saw an evolution in the 2010s as the rise of chip credit cards made a huge impact in the fight against counterfeit credit card fraud, but that simply forced the bad guys to turn their focus to the ever-exploding world of online fraud. (We still don’t have a solution for that.)
The sad truth is that fraudsters will always have an enormous financial incentive to stay at least one step ahead of those trying to stop them. They’ve proven to be creative, relentless and adaptive, and as technology continues to improve, that’s only going to continue.
What this means is that it will only become more and more important for cardholders to build identity theft checks into their regular financial routine. Check your online statements more often. Review your credit reports on a regular basis through AnnualCreditReport.com and tools like MyLendingTree. And be mindful that identity theft is a forever thing. Just because the latest big breach has faded from the headlines, that doesn’t mean you’re in the clear. That’ll be as true in 2030 and 2040 as it is today.
Uncertain about the future of physical credit cards
In today’s digital world, a plastic credit card seems positively quaint. Cards changed in some major ways in the 2010s, including the widespread adoption of the smart chip and the explosion of interest in metal cards, such as the Chase Sapphire Reserve®. And yes, mobile payments became far more common, too. However, most cardholders today still have a plastic credit card, the same way they have for decades.
One of the surest bets in the credit card space over the next decade is that the growth of digital cards will accelerate. We saw a high-profile example of this with the launch of the Apple Card. Apple still offers a physical card to account holders, but the tech behemoth clearly sees that as secondary to using the card through a mobile device. More companies will do the same. The change may come glacially over the next 10 years, but it will come.
Cardholders aren’t convinced. Just under half of cardholders (47%) say they may not or definitely will not still have a physical credit card in 10 years, including just 10% who said they definitely think they won’t have one.
Surprisingly, the younger you are, the more likely you are to think that you’ll still have a physical credit card in 10 years. Almost 7 in 10 Gen Zers (68%) think plastic cards are here to stay, compared with just 50% of boomers. That means that younger Americans – who many see defined by their embrace of and comfort with technology – aren’t convinced that the physical credit card their parents have used for decades is going away anytime soon.
Not convinced a rate cap is in the cards
As the 2010s began, the credit card industry was reeling from the implementation of the Credit CARD Act of 2009. The Act, spearheaded by former President Barack Obama shortly after his election in the midst of the economic crisis, changed the card business profoundly. It changed how and when banks could raise cardholders’ interest rates, how they applied credit card minimum payments, how they could interact with those under 21 and much more. In the wake of this law, issuers spent the first few years of the 2010s getting their feet under them, figuring out how to replace the revenue that the CARD Act changes had erased. Eventually, they succeeded.
Entering the 2020s, the political climate is dramatically different under the current administration, which champions deregulation. Still, Democratic presidential candidates Bernie Sanders (in partnership with Rep. Alexandria Ocasio-Cortez) and Elizabeth Warren have proposed separate plans that would rattle the card industry anew. The plans would implement a cap on credit card interest rates – something that was conspicuously absent from the Credit CARD Act.
There is currently no rate cap on bank credit cards, though there is one on credit union-issued credit cards. Federal law says those cards may not charge more than 18%. Sanders proposes an even-lower cap of 15%, while Warren’s proposal would leave the rate cap up to the states.
Both proposals are dead in the water legislatively under the current administration and a Republican-controlled Senate. However, should the political winds change in Washington in 2020 – or at any point during the decade – a rate cap’s prospect may improve dramatically. And the idea of a rate cap likely isn’t going away. A CompareCards survey showed that about half of cardholders back a rate cap, even if it means reduced access to credit and less lucrative rewards – two likely consequences of a cap, according to industry experts.
Because the concept of a rate cap has such appeal, I think the chances of a rate cap coming in the next decade is higher than many folks believe. Just 24% of cardholders said a rate cap would come in the next 10 years, 18% said it would not and 58% said maybe. Men are twice as likely as women to think a cap will come, while millennials are the most likely age group to say so. Count me in the maybe category as well. If I had to pick a definitive answer, I would choose yes, but I’d feel pretty shaky out on that limb.
Hopeful for a more rewarding decade
It is no secret that credit card rewards skyrocketed in the past decade. What once was largely the purview of a small, passionate group went mainstream in a huge way, reaching its peak with the introduction of the Chase Sapphire Reserve® in 2016.
Now, as a new decade dawns, there is still a dizzying array of rewards cards available, offering everything from points and miles, to cash back and exclusive experiences. In short, it’s still one of the best times ever to collect credit card rewards.
Cardholders seem confident that the good times will continue in the 2020s. About four in 10 cardholders (39%) said they definitely expect to collect more credit card rewards in the new decade, while another 36% think it is a possibility. Men are more confident that women that the new decade will hold more rewards for them, while millennials and Gen Z are more confident than older cardholders.
There’s good reason to be optimistic about credit card rewards. They’re available to more people and on more different types of cards than ever before. (Before the 2010s, secured cards typically didn’t come with rewards, for example.) We see a wider variety of perks offered – everything from traditional points and miles and cash back to ride-share memberships, exclusive access to events and more. Credit card issuers have become more willing to tweak their perks, hoping to find the right combination that will make the card appealing.
There are threats on the horizon, however, some possibly existential.
- A rate cap would almost certainly lead to a dramatic reduction in credit card rewards, possibly even killing them off altogether because banks would no longer have the funds to provide them.
- A cap on credit card swipe fees – the money merchants pay to banks in order to accept credit cards at their store – would also be devastating as well. These fees help many issuers pay for rewards. The European Union implemented such a cap in 2015 on credit cards and debit cards. In the U.S., there is only one on debit card fees. After the cap took effect years ago, debit card rewards largely vanished. They’ve rebounded somewhat, but are still not nearly as available as before the cap.
- An economic downturn could force issuers to scale back rewards in order to protect their bottom lines in the face of added delinquencies and bankruptcies.
A downturn is inevitable, as economic good times don’t last forever. The others are possible, but far less likely.
Predicting the future is always risky, but as the 2020s begin, some things seem clear. Credit card debt is going to keep growing. Credit card fraud and identity theft will continue to evolve, but it isn’t going anywhere. And people still love their credit card rewards.
Beyond that, however, our crystal ball is blurry. No one knows what the future holds for credit cards in terms of technology, consumer adoption, government regulation and many other areas. Changes are no doubt ahead.
All that said, the cardholder’s job remains the same. If you have a credit card, Job No. 1 is to pay that balance off as soon as possible. Ideally, you’d do it every month, but life is expensive and that’s not always doable. It should always be the goal, however.
You should also build identity theft protection into your regular financial routine. Check your online statements weekly. Check your credit reports. Change your passwords. All these things can be done quickly and easily, and they matter.
Above all, remember that no one cares as much about your money as you do. The more you can do to control and protect your finances, the better off you’ll be. That’s something that will never change, whether it’s 2020, 2030 or beyond.
CompareCards commissioned Qualtrics to conduct an online survey of 1,163 credit cardholders, with the sample base proportioned to represent the overall population. The survey was fielded Dec. 13-16, 2019.