While it is still early in the year, we can already make a few assumptions about what consumers will be doing with their credit cards.
Increased Balances
According to a recent TransUnion report, credit card balances are expected to continue increasing in 2022 but remain below 2019 levels.
As stimulus money has been all but exhausted by consumers at this point, they have switched from debit cards to credit cards. This can be seen in the continued increase in credit card balances. It also helps that credit card companies are increasing credit limits for consumers, in some cases automatically and without any intervention from consumers.
Credit card companies are willing to increase credit limits because delinquency rates remain low and the economy is normalizing post-pandemic (i.e., services spending is increasing). This will have an overall effect of loosening credit restrictions. Delinquency rates are expected to remain low as consumers have the option to tap into the increased value of their homes via equity credit.
As consumers begin venturing out more and spending on services increases, credit card balances will increase as well. Think of larger ticket items such as travel and all that it encompasses.
Credit Card Companies Implementing Their Own BNPL Option
BNPL seems to be everywhere. It's also a direct competitor to credit card payments. Credit card companies are introducing their own form of BNPL. One example is American Express' Pay It Plan It. Customers don't have to put a large payment on their card with the Amex option. They can pay it off in equal installments, just like other BNPL plans.
One disadvantage of BNPL is that it does not report payment history to credit bureaus. But that is changing. Equifax is working with companies that use BNPL so that customers using BNPL can build their credit history as if they were making regular credit card payments.
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