My Predictions For Credit Cards In 2015

It’s nearly the end of 2014, I thought this would be the perfect time to look towards the future and make a few predictions Nostradamus style. Technically I’ve cheated as I’ve asked various friends and colleagues that work in this industry what their thoughts are as well.

Credit Card Predictions

Before making these predictions it’s important that people understand a little bit about credit card issuers. In general customer acquisition costs are massive. One insider said that anything under $400/cardholder for premium cards was seen as a decent acquisition cost, whilst sub prime cards (e.g secured) are usually around $75/cardholder.

• Aggressive promotion of near-field communication/contact less payments. We’ve already a seen a bit of this with different card issuers adding bonuses for adding their cards to Apple Pay and Softcard, but 2015 will be a big year in the battle for these new payments. I think we will see some of the following promotions offered:
  • 5% cash back on all contact less purchases under $100 for 3-6 months (new accounts only)
  • $5-$30 for adding a credit card to a contact less solution
• Merchants will try to enter the payment game without success. Merchants will be trying to gain some of the credit card market share themselves through applications such as CurrentC which would help them avoid 2-3% in credit card processing fees but I can’t see consumers signing up for it given the following:
  • The technology is subpar compared to the offerings credit cards have
  • It doesn’t provide zero fraud liability
  • Most consumers are already able to get at least 2% cash back by using a credit card, merchants would need to offer more than this in discounts for using the app (although I do think they will offer a 5-10% discount to try and encourage use)
• Online payments will also be promoted excessively. Traditionally when consumers purchase something online, they enter their card information with each merchant. Not all consumers are comfortable with this (even if their card issuer does offer zero liability protection). In the past Visa has offered verified by Visa and Mastercard has offered secure code which require you to input a password as well as these details. Visa checkout is the latest offering, we’ve already seen promotions for this service (card issuers wanting to be top of the online wallet) but more will come in 2015, as well as competition and lots of it.
• Sign up bonuses will remain the same relatively. I think that we will see some sign up bonuses increase, especially on credit cards that offer loyalty points but devaluations with these programs will mean that relatively the bonuses are worth the same as they were in 2014.
• Barclays card will secure another airline partner. This will most likely be JetBlue, but maybe Barclay will pull something out of their hat to replace US Airways as their major airline partner.
• Anniversary bonuses will become more common. Because customer acquisition costs are so high, card issuers want to ensure they get good value out of their current cardholders. They also want to charge annual fees (in fact, most co-branded partners require this), annual fees turn off a lot of consumers. One way to balance this is to offer an anniversary bonus, this will become a lot more common in 2015.
• Targeted on going spending bonuses will become more common. One thing that card issuers are obsessed with is being “top of wallet”, this is why they won’t charge currency conversion fees (because they don’t want another card to become top of wallet whilst your overseas). One of the easiest ways to bring a card back to top of wallet is by offering a targeted spending bonus, you already see Barclay do this a lot (e.g spend $750 per month for four months and get $200).  This tactic will only be used more often in 2015.
• Cash sign up bonuses to become more relevant. I’m a big fan of cash sign up bonuses rather than loyalty points, mostly because I’ve already got a big enough stash. As loyalty programs have been continually devalued I think you’ll see more and more consumers opt for cash bonuses instead. This also allows card issuers to gain market share even if they don’t have any co-branded partners in the travel space (e.g Wells Fargo). Historically they have offered points which can be redeemed for travel expenses (e.g Barclay & Capital One), but I think 2015 will see cash become king once again.
• Relationship bonuses will change. In 2014 Chase removed their 10% bonus on all points earned on the Chase Freedom card if you held a Chase checking account and Bank of America introduced their Preferred Rewards program. I think relationship bonuses will increase, but the focus will be on how much money you have deposited with that card issuer, rather than having a checking account open.

Final Thoughts

What do you think will happen with credit cards in 2015? I’d love to hear your thoughts (or your thoughts on my thoughts if you’d preferred) for the up coming year. I’m looking forward to the end of 2015, so we can all have a chuckle at how wrong I was.