As interest rates climb higher, here’s what’s in store for credit cards this year

In 2022, we got revenge. Revenge spending, revenge travel — we were determined to make up for time we lost amid the height of the COVID-19 pandemic. But the economy had other plans, and inflation and rising interest rates started to limit the fun. Over the past year: 

Here’s what may be in store for credit cards in 2023.

1. Credit card companies could re-tighten their belts

Earlier in the pandemic, credit card issuers toughened their lending practices. They required higher credit scores to qualify for many cards and limited balance transfer offers (only to bring them back later). According to NerdWallet’s 2021 Consumer Credit Card Report, close to 1 in 5 credit card holders (19%) reported that the limit on one or more of their credit cards decreased since the pandemic began.

In 2023, concerns of a recession continue, and that could lead credit card issuers to become more conservative in their lending practices again, according to Jessica Duncan, director of research and insights at Competiscan, a company that tracks and analyzes direct marketing activity. This may eventually affect credit limits and the availability of balance transfer credit cards this year.

2. Interest-lowering options will be popular

High credit card balances, combined with high interest rates, have consumers looking for ways to lower the cost of their debts. Balance transfer credit cards remain an option for those who qualify, and they aren’t just for new applicants. You may receive compelling balance-transfer promotions on cards you’ve held for a while, too.

Card issuers are also more heavily publicizing their built-in buy now, pay later features to compete with third-party companies that offer installment plans at the point of purchase, according to Beth Robertson, managing director of Keynova Group, a financial services intelligence firm. Robertson notes that programs tied to your credit card could be a more consumer-friendly option because you can still benefit from purchase protection and the opportunity to earn rewards.

Read: Buy now, pay later vs. credit cards — which one is better for you? The answer may surprise you

Card issuers are also increasingly offering ways to borrow against your credit limit at a fixed interest rate that’s typically lower than your card’s standard rate. In doing this, you can access funds without having to go through a loan application or credit check. 

Michele Raneri, vice president of U.S. research and consulting at TransUnion
notes that consumers will also turn to other ways to consolidate credit card debt at lower interest rates, including personal loans and home equity loans.

Also see: Frequent travelers: Is your airline loyalty paying off? It may be time to switch.

3. Security remains top of mind

Data from TransUnion, one of the three major credit bureaus, found that the average number of suspected digital fraud attempts in the shopping-heavy time between Thanksgiving and Cyber Monday was 127% higher in the U.S. compared with the rest of 2022 before the start of the holiday season. An increased sense of safety may come from something you already carry: your phone.

See: 6 things to do if you’re a victim of credit card fraud

Earlier in the pandemic, digital and mobile wallets were touted as a way to make purchases without having to touch a payment terminal or place your card into another person’s hands. Until we knew more about how COVID-19 was transmitted, high-touch surfaces were not to be trusted.

Now, digital wallets are marketed in a new way, according to Duncan: They help guard your credit card information from potential fraud because they use tokenization. When you use a digital wallet, the merchant receives a random series of letters and numbers instead of your actual credit card number, which keeps your information safe from potential security breaches. Virtual credit card numbers can also be used for online purchases, and they use tokens in much the same way.

4. Rewards may focus on specific merchants and lifestyle perks

Traditionally, credit card rewards are tied to merchant category codes, which assign a broad spending category like “supermarkets” or “department stores” to rewards programs. So, for example, extra points in the travel category may come from purchases falling under the codes for airlines, hotels and rental cars.

Rather than offering extra rewards in broad spending categories, some cards partner with certain retailers, offering cardholders the ability to earn more where they shop the most. This provides a feeling that your card is truly customized to match your habits, but it can take some extra work on your part if you need to regularly log in to your account to switch your merchants of choice. “I do think it’s great that there’s the option of selecting merchants, but at least for me, that would be a management issue,” Robertson says.

Lifestyle rewards — like extra points for rent payments or health and wellness purchases — are catching on, too.

Plus: Credit-card balances surge — as inflation and interest rates create ‘hardships’ for cash-strapped Americans, TransUnion says

5. Tools will help you track spending and subscriptions

The mobile experience remains important, especially for younger consumers. And it grows more robust each year, allowing you to manage your credit card use and even make major decisions, like whether to borrow against your credit limit, from your phone. New features can also help you keep a better eye on where your money is going.

“Everything is through a subscription now,” Duncan says. While that’s convenient, it’s far too easy to forget what you’ve signed up for — and what’s adding small charges onto your card each month. Chase’s
Stored Cards tool is an example of how you can better manage expenses with the help of a card app. You can see which merchants and digital wallets you have your card information saved with and which of those merchants charge you a recurring subscription fee. It’s an easy way to find out whether you’re still paying for something you didn’t mean to keep paying for.

Sophisticated virtual assistant services can eliminate the need to call customer service. With U.S. Bank’s Smart Assistant, you can type or speak into the app to ask questions, look up charges or even complete financial tasks. Capital One’s
Eno is a similar tool that answers your questions, reminds you that a free trial is ending, alerts you about unusual charges and more. While neither tool is new this year, they’re part of a growing trend of more sophisticated ways to keep tabs on your card use.

More From NerdWallet

Sara Rathner writes for NerdWallet. Email: [email protected]. Twitter: @sarakrathner.

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