The past three years have been volatile for credit card issuers and users given the recession, consumer deleveraging, and new Credit Card Accountability, Responsibility, and Disclosure (CARD) Act regulations.
Next year will have smaller, more subdued changes as credit card issuers find ways to manage risks, add new accounts, and increase revenue, while cardholders continue to pay down their balances and possibly use alternative forms of payment, according to Bill Hardekopf, CEO of LowCards.com.
He makes these credit card predictions for 2011:
1. APR increases
A significant number of restrictions have been placed on issuers during the past two years, which has had a dramatic effect on their revenue. Due to the CARD Act, issuers can’t increase the annual percentage rate (APR) on accounts during their first year unless there are some unique circumstances.
Therefore, issuers have increased the APR on new accounts. The average advertised APR of all credit cards issued in the U.S. before the CARD Act went into effect was 11.64%. In December it was 13.8%.
2. Delinquencies will continue to fall
Many delinquent accounts have been written off since their peak in the first quarter of 2009. According to TransUnion, 1.21% of all credit cards were 90 days or more past due at that ime.
The company expects card delinquencies to fall to 0.75% by the end of 2010 and 0.67% by the end of 2011.
3. More offers in the mail
Issuers will increase the number of solicitations, especially for people with excellent credit.
During the second quarter of 2010, U.S. households received 640.3 million credit card offers, an 83% increase over the 349.1 million offers mailed during the same period in 2009. Chase, the largest mailer, quadrupled its mailings during this time, and Citibank nearly tripled its mailings.
Synovate estimates that lenders will have sent about 2.5 billion credit card offers by the end of 2010. While this is much lower than the six billion offers sent in 2005, the peak year, it’s a significant increase that’s expected to continue.
Next: Lending standards will loosen slowly