Credit Cards

Credit card trends for 2022

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We’ve already seen a shift in credit card spending and offerings in recent months.

Balance transfer cards have made a comeback after disappearing during the pandemic, an influx of everyday rewards categories increased the value of essential purchases like groceries and gas, and new card options like crypto rewards cards entered the market.

But experts predict continued changes in Americans’ credit card use this year, including how and where we spend, more flexible payment options and ever-increasing ways to access credit.

There is still a lot in store for next year. Here’s what the experts are predicting for credit card holders through the rest of 2022 and beyond, and how you can prepare.

Travel rewards and benefits

As travel ceased due to pandemic lockdowns and restrictions, many issuers responded by shifting from travel rewards to bonuses on everyday spending, even among the most premium travel credit cards.

Benét Wilson Courtesy of Benét Wilson

But as restrictions are lifted and more people start traveling again, look to issuers to launch higher rewards and special offers for travelers, like the coveted 100,000-point welcome bonus, says Benét Wilson, senior editor at The Points Guy. (owned by Red Companies, like NextAdvisor). Big bonuses like that can help you save on everything from booking your next trip to flight upgrades to free nights at a luxury resort.

“We have been in this pandemic for three years and many people have not traveled. They are ready to go,” says Wilson.

However, it also predicts that cardholders will also want to keep the rewards they’ve enjoyed in everyday spending during the pandemic. For those cardholders, the best of both worlds can be travel cards that earn points from everyday spend that you can redeem for bookings and travel benefits.

For example, with the American Express® Gold card, you’ll earn 4X Membership Rewards points at U.S. restaurants and grocery stores (up to $25,000 per calendar year, then 1X after that), plus 3X Membership Rewards points on flights booked on American Express or directly with the airlines. Membership Rewards points are flexible, so you can redeem them for travel booked through Amex, for purchases you make with your card, or transfer them to Amex travel partners.

Flexible Choice Rewards

In addition to the shift toward everyday categories in recent months, there’s also a continued move toward flexible and personalized credit card rewards.

“We’re seeing an increasing number of choose-your-own-adventure offerings,” says Ted Rossman, senior industry analyst at CreditCards.com, which like NextAdvisor is owned by Red Ventures. As issuers look for new ways to retain cardholders, flexible rewards are a way to ensure you still get the most value, even if your spending habits evolve over time.

ted rossmanTed Rossman Courtesy of Ted Rossman

For example, the Citi Custom Cash℠ card offers 5% cash back on your primary eligible spending category each billing cycle (up to the first $500 spent, then 1%). Eligible categories include gasoline, grocery, restaurants, select trips and more.

The flexibility also applies to refunds. Cash back cards, for example, aren’t usually restricted to just cash rewards. “Now you can redeem for cash back, statement credits or travel,” says Rossman. “So I think we will continue to see that kind of diversification.”

However, before you apply for any new card, find out which one will give you the highest rewards based on your spending and preferences. Take a look at your budget from the past few months and consider which rewards and redemption options might best fit your spending habits.

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New options Buy now, pay later

Buy now, pay later services are already a popular payment option for online shoppers, although they can also be risky. Transunion even recently announced plans to allow users to choose to report BNPL payments in their credit profiles. As a result, you can use BNPL plans to build credit the same way you would traditional credit cards or installment loans, if you pay on time.

This year, BNPL’s options are also expected to expand to in-person purchases, through buy now, pay later with credit cards. Just like the services that already exist, you can use a BNPL credit card to make interest-free installment payments on any purchase.

Jason SteeleJason Steele Courtesy of Jason Steele

BNPL plans can be attractive to consumers who are concerned about accruing interest. Just knowing there’s a finish line when your purchase is paid off after four interest-free payments may make some users more comfortable, says Jason Steele, a credit card writer and industry expert.

But just as some experts say BNPL can make overspending or impulse purchases more tempting, the same caveat may apply to credit cards that incorporate buy now and pay later plans. Even if installment plans are interest-free, you may incur late fees if you miss a payment, and delinquent activity may also be reported to credit reporting agencies.

Some credit card issuers already offer similar installment plan options, such as Pay It, Plan It from American Express, and My Chase Plan from Chase. “It’s not going to put credit cards out of business, certainly anytime soon. But I do think it’s cutting market share to some extent,” says Rossman.

More credit opportunities

In recent months, demand for credit cards has rebounded, with card applications up more than 10% between October 2020 and October 2021, according to a recent Reserve Bank Access to Credit Survey. New York Fed. And at the same time, issuers and other institutions are making credit more accessible than ever.

“I think banks are becoming more aware of the Gen Z demographic that has largely been outside of the traditional credit system. [and] is looking to join,” says Rossman.

Alternative methods of building credit are helping people access credit and use cards that offer rewards and perks, like the Petal 1 “no annual fee” Visa credit card and the Tomo card. And credit scoring alternatives like TransUnion’s Experian Boost, UltraFICO Scores and eCredable Lift can help you build your credit by reporting timely payments to transmission services, utility providers and other monthly bills.

Economic factors can lead to more debt for cardholders

In addition to rising costs of everyday goods due to record inflation, the average credit card holder already has an average credit card debt of $5,525 according to Experian’s 2021 Credit Status Report, and those balances could grow this year.

Rod GriffinRod Griffin Courtesy of Rod Griffin

“When COVID started, we saw people pull back from credit cards and balances go down,” says Rod Griffin, senior director of public education and advocacy at Experian. “We saw a reduction in the way people used the cards. Now that we’re coming out of the pandemic, I think there’s really been a desire for people to feel like they’re getting back to normal.”

The end of stimulus payments, expanded Child Tax Credit payments and expanded unemployment benefits may contribute to more people relying on the credit in the coming months, Rossman adds, all compounded by rising inflation.

To offset rising costs and debt, the experts we spoke with recommend setting a budget and following good credit habits, like charging only what you can pay in full each month. If you’re already paying down debt, consider a balance transfer card with a 0% introductory offer.

It’s also important to find ways to save whenever possible. If you’re planning to get a new credit card, see if you qualify for the lowest interest rate possible, says Griffin. And in addition to rewards that work with your spending, look for cards that don’t have many fees to save money while building your credit and earning rewards.

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