Category Archives for Credit Cards.
We’re in a recession. We’re not traveling. Rewards credit cards that are optimized for travel may not be top of wallet. Cards that are optimized for heavily travel customers may also not match current spending patterns. We’re beginning to see brands and issuers adapt.
Discretionary spending is down by a third, driven by a drop in travel spend which is down 95% – 99%. Amazingly travel and entertainment was nearly one-third of American Express charge volume.
A month ago I wrote that credit cards might soon become tougher to get as banks tightened lending standards. In a down economy there’s more risk that banks won’t get paid back, so it’s logical they’d become careful about extending credit. Already we’ve seen what appears to be a tougher approach to new small business cards at Chase.
When banks expect an increase in defaults, they take steps to limit their exposure. During the Great Recession we saw banks unilaterally cut credit limits, especially where cards were going unused or underutilized.
Citi has added Emirates Skywards as a points transfer partner for its Citi Premier and Prestige cards. Emirates is now a partner of Citi, Chase, American Express and Capital One – this strikes me as a problem for Barclays which is rolling out an Emirates credit card in the U.S.
Emirates offers great award availability from a variety of U.S. destinations, however fuel surcharges (which depend on the destination flown) are often very expensive and premium cabin awards are priced at 2x coach for business class and 3x coach for first class.
In the years following 9/11, as airlines struggled, and again during the financial crisis airlines pre-sold miles to their credit card partners at a discount in order to raise cash quickly. United and Delta each pre-sold miles, the former for about $500 million and the latter twice totaling about $1 billion. American did it too with Citibank. These ‘cheap miles’ paved the way for banks to offer big bonuses to consumers both for acquisition and for ongoing spend.
These conversations have started again as a way to raise cash.
Citi is revamping its Premier and Preferred cards. Citi Premier gets new earning categories, and spending points on paid travel will no longer be as lucrative (making points-to-miles transfers the only good option). Citi Preferred is getting new bonus categories.
A year ago I offered advice on sanitizing credit cards. Since then I learned that your credit cards are actually dirtier than the bathrooms at New York’s Penn Station.
Now as we try to sanitize our hands, and everything we touch, especially the few times we go outside this has greater relevance than ever. Did you hand your card over to a store clerk? Did you stick it inside a card reader machine, and what was on the last card that was in there? I actually sanitized my cards, even before the current crisis.
Everything has changed. You may have opened a new small business credit card, and your business is temporarily closed under a ‘shelter in place’ order. Or you’re just pending less in light of uncertainty in the economy.
Maybe you’re stuck at home, buying groceries but you had planned for big expenses you’re putting off (like travel!). I’m sure there are many readers wondering how they’re going to meet the minimum spend requirement for those credit card bonuses.
A lot of people are becoming unemployed. To a credit card issuer that means late payments and eventually chargeoffs. The reason banks sometimes reduce credit lights, and tighten lending standards, in a down economy is because there is more repayment risk. This reduces their exposure to bad debt.
I’m still excited for the long term of rewards cards. Thanks to the government’s money printer go brrr right now the cost of credit to banks is unbelievably low.
As some travel providers fight to hold onto cash without delivering services you may need to turn to credit card charge backs – putting your credit card issuer on your side to get your money back.
Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel -- a topic he has covered since 2002.
Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »
