All Change for Credit Card Choices in Light of COVID

https://thefintechtimes.com/all-change-for-credit-card-choices-in-light-of-covid/
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As the New Year kicks off financial fitness evaluations for many Americans, GigaPoints, a platform that provides personalised credit card recommendations based on a user’s spending, earlier this week released its 2021 Credit Card Trends report. Results from a new IPSOS poll illustrate how credit card usage is changing, with three main themes heading into the new year: new generations of credit seekers, the pursuit of cashback, and a strategic eye for card choice. 

For many, the new year means new credit cards, with one in five respondents planning on opening a new account in 2021. Of the respondents opening new credit cards, the Gen Z (40%) and Millennial (33%) generations top the list, with males (24%) outnumbering females (12%) two to one.

“Americans are signalling a year of change when it comes to choosing credit cards,” said Erik Budde, CEO and founder of GigaPoints. “With the COVID-19 vaccine beginning to be administered nationwide and a sense of normalcy eventually coming back, we will see the opportunity for growth within the credit card market, especially among Gen Z, Millennials, and men.”

Credit card rewards drive card usage and switching

Seven in ten credit card users say that credit card rewards are very important to them, and 73% of Americans prefer cash back over other types of rewards. Among credit card holders, 60% say that earning credit card points and rewards makes them want to use their cards more often—particularly Millennials (67%) and Gen Xers (66%).

Though 57% of Americans believe they get the maximum possible rewards from their current credit card(s), three in ten find it difficult to understand which rewards programs would be best for them. More than half (53%) of cardholders say that they would consider getting a new card or switching credit cards if they could earn more rewards. At 41%, “earning better rewards” is the top reason cited for wanting to get a new card in the year ahead, among those who plan to do so.

“Most credit card users agree that rewards are a powerful incentive for spending—but many aren’t sure how to identify which cards are best for their spending habits,” said Budde. “GigaPoints was created to take the guesswork out of choosing a credit card by quickly and securely offering users data-driven recommendations that will earn them the most rewards or cashback based on their spending.”

COVID and credit cards

Nearly one in five (19%) credit card users say they changed which credit card they use the most due to the COVID-19 pandemic. This jumps to 36% among Millennial credit cardholders. Another 19% of all Americans say once COVID-19 is no longer a major concern, they anticipate changing which credit card they primarily use to earn points, rewards or cashback, with Gen Z (35%) and Millennial (37%) credit card users once again leading the pack.

Nearly 40% of credit card users are currently saving their credit card travel rewards for future use, which rises to 47% among affluent consumers (household income of $100,000 or more).

With personal finance top of mind for many Americans, especially with the enduring challenges of COVID-19, many are looking to save money wherever they can—and in the case of credit cards, maximize existing spending to the best extent possible.

Additional findings

  1. Cash back (73%) is the preferred type of credit card reward, especially for:
  • Women (77% vs. 67% of men);
  • Lower income earners (79% of those with a household income of $50,000 or less vs. 64% of those with a household income of $100,000 or more); and
  • Those with no college degree (77% vs. 68% of those with a degree).
  1. Groups who over-index on saying credit card rewards are very important to them include:
  • Older adults (68% of those aged 55+ vs. 53% of those aged 18-34);
  • The more affluent (71% of those with a household income of $100,000 or more vs. 44% of those earning $50,000 or less); and
  • Those with a college degree (68% vs. 52% of those with no degree).
  1. More than half (53%) of credit card owners would consider getting a new credit card/switching cards if they could earn more rewards, especially:
    1. Young adults (63% of those aged 18-34);
    2. Those in the top income bracket (55% of those with a household income of $100,000 or more);
    3. Those with a college degree (58%); and
    4. Credit card owners who plan to get a new card in 2021 (73%).
  1. Nearly 30% of Americans find it difficult to understand which credit card rewards and points programs would be best for them:
  • Just over half of Gen Z adults (52%) admit they struggle to understand which credit card rewards would be best for them.
  • A third of Millennials (34%) say the same.
  1. Americans are most likely to use credit card rewards for cashback (47%), though roughly one in five also use their rewards for everyday spending (22%), vacations (19%), and/or gifts (16%).
  • A third say that they are currently saving their credit card travel rewards to use in the future or post COVID-19 (34%), though 21% do not think it will be safe to travel until 2022 or later.
  1. Credit card rewards play a major role in deciding to go with a particular credit card company for 56%. This is especially true for:
    • Those in the top income bracket (67% of those with a household income of $100,000 or more);
    • Those with a college degree (63%); and
    • Those who say credit card rewards are important to them (82%).
  1. Among those who say they will be getting a new card in 2021:
    • 41% say that this is to earn better rewards;
    • A third want a better interest rate (32%); and
    • One in five want to increase their debt limit (22%) and/or avoid annual fees (21%).
  • Gina is a FinTech journalist (BA, MA) who works across broadcast and print. She has written for most national newspapers and started her career in BBC local radio.

https://thefintechtimes.com/all-change-for-credit-card-choices-in-light-of-covid/