Personal Finance Predictions for 2010: Your Credit Card
What credit card twists lie ahead in 2010? The CARD Act, that will come into effect in February 2010, will have both direct and indirect impacts on credit cards as issuers retool their products to meet stricter regulations and adjust their portfolios to offset the self-inflicted impact on profits.
Andrew Davidson, a senior vice president with the direct market research firm Mintel Comperemedia, studies the credit card industry. He has released a report, “Navigating the CARD Act: Evolving Acquisition Strategies,” in which he sees the following trends:
- APRs will soar. Cardholders have already felt some of the sting of rising credit card rates as issuers rebalance their pricing models to recoup losses. “It’s likely that we will see rates in the high teens or low 20s (percent) within the next year or so,” Davidson predicts.
- Fixed-rate cards will continue to disappear. The cards will be replaced by variable, risk-based APRs linked to the prime rate.
- Fee-based cards are on the increase. American Express, Chase and Citi are leading the charge. This fall, 76% of American Express’ mail volume carried an annual fee, up from 38% a year ago.
- “Plain vanilla” cards fall out of favor. Cards with no annual fees and no rewards accounted for 30% of direct mail solicitations just a year ago. In 2009, that fell to just 5%. “These cards are now practically a niche product,” Davidson says.
