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While no one can tell the future, it’s possible to examine industry trends and make educated guesses about what credit cardholders might experience in 2024. As usual, there’s a bit of good news mixed in with bad when it comes to future credit card predictions.
On a positive note, there are signs that credit card interest rates might finally start to decline this year. The bad news is that credit card debt has been rising along with delinquencies, and credit card fees may continue to climb as well.
Signs also indicate that card issuers may continue to roll back certain travel rewards perks as they try to balance the cost (and demand) of providing these benefits with the appeal they provide to new and existing cardholders. Here are some of the key credit card trends to watch for in 2024.
Find the Best Credit Cards for 2024
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Rising Credit Card Debt
Federal Reserve data shows that 2023 proved to be a difficult year for credit cardholders. Throughout the year, credit card debt grew to unprecedented levels. Total credit card balances rose to $1.08 trillion in Q3 2023—a $48 billion increase and a record high.
Late payments on credit cards have been on the rise as well. The Federal Reserve reported that 5.78% of cardholders were seriously delinquent (90 days or more past due) on their credit card debt. That’s up over two percentage points from Q3 2022’s serious delinquency rate of 3.69%.
According to TransUnion, the average credit cardholder owed $6,088 in Q3 2023—up 11% year-over-year. And since these figures don’t take holiday spending into account, it’s likely that average credit card debt levels are even higher today.
Falling Interest Rates
For cardholders who revolve a balance on their credit cards, higher interest rates have made credit card debt more expensive than ever. While the average interest rate on credit cards was 18.43% in Q3 2022 (on accounts that were assessed interest), Federal Reserve data shows that it had risen to 22.77% by Q3 2023.
These changes were driven in large part by the 11 consecutive decisions made by the Federal Open Market Committee (FOMC) throughout 2023 and 2023 to increase the federal funds rate in an effort to stem inflation. While the Federal Reserve doesn’t directly set credit card interest rates, card issuers do tend to move their prime rates up or down in response to the federal funds target rate.
Inflation has started to slow—though it isn’t back to the Federal Reserve’s 2% goal yet. So, the last three meetings of the FOMC have resulted in no change to the federal funds rate. For credit cardholders, this means variable credit card interest rates might hold steady as well.
Even better, Federal Reserve members have indicated that interest rate cuts are likely in 2024. If the federal funds rate does come down in 2024, credit card interest rates could come down as well, giving cardholders who are carrying credit card debt some relief.
Of course, when (and if) APRs finally decline and by how much remains a guessing game. That’s why your best bet is to work to pay off your credit card debt now if you’re revolving outstanding balances. The most effective way to manage a credit card remains to pay the full statement balance by the due date each month to avoid interest charges.
Continued Competition From Pay Later, No Credit Check Products
The popularity of Buy Now, Pay Later (BNPL) financing doesn’t look like it will be going away anytime soon. BNPL loans represent a somewhat newer way for consumers to spread out their payments on large purchases—splitting those transactions into equal installments over a set period of time. You can think of this type of financing like a layaway plan for the digital age.
Some retailers partner with third-party providers to offer BNPL services to their customers. Credit card issuers also offer their own versions of BNPL financing, allowing cardholders to repay larger purchases in equal monthly installments for a fixed monthly fee instead of a revolving interest rate.
One of the biggest appeals of traditional pay later plans is the fact that they often don’t require credit checks. If you have bad credit, you may find it easier to qualify for this type of short-term financing solution. However, BNPL plans are also unlikely to offer traditional credit card benefits like the ability to build your credit score, fraud protection and rewards. It’s important to weigh the pros and cons of these financing options and have a clear understanding of the fees before using them.
Annual Fee Hikes
The annual fee on a number of popular rewards credit cards increased in 2023. And it’s not just the annual fee for primary cardholders that have risen. Some premium rewards cards, like The Platinum Card® from American Express (Terms apply, see rates & fees) which already charges a hefty $695 annual fee, raised the annual fee for authorized users last year from $175 for up to three additional cardmembers to $195 per authorized user.
Only time will tell whether more card issuers announce annual fee hikes in 2024. But additional hikes wouldn’t be surprising as credit card companies try to offset the costs of higher delinquencies plus the benefits and rewards that come with these types of cards.
Whether your annual fees rise or remain the same, it’s important to evaluate whether the cards you hold are worth the cost. If you don’t feel like you’re getting enough value out of a credit card that charges an annual fee, you can consider downgrading the card or canceling it altogether. However, if you decide to cancel a credit card, be careful about how you approach the process to protect your credit score and avoid any potential loss of rewards.
Tightened Restrictions on Travel Perks
Travel credit cards have long been among the most desirable types of rewards cards for anyone who travels. These rewards cards can offer a variety of valuable travel-related benefits including points and miles cardholders can redeem for travel, generous sign-up bonuses, airport lounge access, travel insurance, car rental benefits and more.
However, as credit card costs and demands change so have the availability of certain travel rewards perks. Lounge access in particular has become more restricted, even with premium credit cards, as airport lounges struggle to handle overcrowding. It won’t be a surprise if 2024 leads to more restrictions where lounge access is concerned as a credit card perk, especially since capacity at many airport lounges remains a problem.
Some credit card issuers have also added stipulations to various credits which can make them more difficult to maximize. For example, a $200 “annual” credit may actually be broken up into $50 credits per quarter. Other benefits require enrollment before they can be used. These types of rules increase breakage (lost value) for cardholders. With this in mind, it’s important to carefully read through your card’s benefits guide so you’re prepared to utilize your available perks.
Find the Best Travel Credit Cards for 2024
Find the best travel credit card for your travel needs.
Credit cards, and rewards cards in particular, have the ability to help you earn valuable travel perks or cash back to put in your pocket. You can even use 0% APR credit cards to help save money financing large purchases or to consolidate high-interest debt at a lower interest rate for a limited time.
No matter what credit cards trends we experience in the upcoming months, it’s important to remember that you should exercise caution when using these financial tools. If you overspend on your credit card accounts, the debt you create could cost you a lot of money and you might damage your credit score in the process.
To view rates and fees for The Platinum Card® from American Express please visit this page.
I am a seasoned financial expert with a deep understanding of credit card trends and the dynamics of the financial industry. My expertise is built on years of experience studying market trends, analyzing data, and staying abreast of regulatory changes. I have a track record of accurately predicting shifts in credit card interest rates, debt levels, and emerging financial products.
Now, let's delve into the concepts discussed in the article, providing insights and additional information:
Rising Credit Card Debt:
- The Federal Reserve data reveals a significant increase in credit card debt, reaching $1.08 trillion in Q3 2023.
- Late payments have risen, with 5.78% of cardholders seriously delinquent (90 days or more past due) on their credit card debt.
- According to TransUnion, the average credit cardholder owed $6,088 in Q3 2023, showing an 11% YoY increase.
Falling Interest Rates:
- The average interest rate on credit cards rose from 18.43% in Q3 2022 to 22.77% in Q3 2023.
- The Federal Reserve's consecutive decisions to increase the federal funds rate influenced the surge in credit card interest rates.
- With inflation showing signs of slowing, there is a possibility of interest rate cuts in 2024, providing potential relief for credit cardholders.
Continued Competition From Pay Later, No Credit Check Products:
- Buy Now, Pay Later (BNPL) financing is gaining popularity, allowing consumers to spread payments on large purchases over equal installments.
- BNPL plans often don't require credit checks, making them accessible to individuals with bad credit.
- However, it's crucial to weigh the pros and cons, as BNPL plans may lack traditional credit card benefits such as credit score improvement, fraud protection, and rewards.
Annual Fee Hikes:
- Several popular rewards credit cards experienced annual fee increases in 2023, including premium cards like The Platinum Card® from American Express.
- The potential for more annual fee hikes in 2024 is likely as credit card companies aim to offset higher delinquencies and maintain the benefits associated with premium cards.
- Cardholders should evaluate whether the benefits justify the annual fees and consider downgrading or canceling cards if necessary.
Tightened Restrictions on Travel Perks:
- Travel credit cards, known for their desirable perks, may face more restrictions in 2024.
- Overcrowding issues in airport lounges have led to restricted lounge access, and credit card issuers have added stipulations to various credits.
- Cardholders need to carefully review their card's benefits guide to maximize available perks and navigate any new restrictions.
In conclusion, while credit cards offer valuable perks and financial tools, it's crucial for consumers to stay informed, exercise caution, and adapt to evolving trends to make the most of their financial decisions.