#CreditCards / The Impending Credit Card Boom

… Three factors are driving a 2021 credit card comeback:

1) Economic recovery… when travel-related spending comes back, credit card payment volume will make a huge jump.

The impact of the recovering economy can already be seen by the $100 billion increase in credit card payment volume-versus $80 billion increase for debit cards-between the second and third quarters of 2020.

2) Rewards. As the WSJ pointed out, a big factor contributing to the increase in debit spending in Q2 and Q3 was the shift to mobile payments. What the article didn’t point out, however, is that only about a third of credit cardholders link a credit card to their Apple Pay or Google Pay accounts. That means the shift to mobile payments… led to an unintentional shift to debit spending… As mobile payment behaviors becomes more the norm than the exception, expect consumers to switch their linked card from debit to rewards-generating credit cards.

3) Credit builder cards… As credit card-related debt grew in the past year or two … so did the number of credit card critics. A few companies are actually doing something about.

Challenger bank Chime launched a “credit builder” credit card… “Chime users add money to their Chime Spending Account and then charge their purchases using the credit card. At the end of the month, Chime’s Safer Credit Builder feature automatically pays off the credit card balance from the secured account, and reports the payment to the major credit bureaus.”

Fifteen percent of Chime users already have the company’s credit builder card according to Cornerstone Advisors’ research.

Another fintech startup, Cred.ai (backed by singer John Legend), has an unique concept. If you agree to let the Cred.ai manage your spending, the company says it’s algorithms will ensure that you won’t pay interest or late fees-and you’ll build credit.

A third company is addressing both credit building and rewards. Upgrade, a new fintech started by Lending Club founder Renaud Laplanche, will offer cardholders 1.5% cash back on purchases… however: “Instead of being credited at the time of purchase, the rewards will be credited when cardholders make their monthly balance payments. The faster cardholders pay off their balances, the sooner they will receive their cash back.”

The Coming Credit Card Boom… According to Cornerstone Advisors most recent study, two-thirds of Millennials now have at least one credit card, and 40% have two or more… Of the roughly 22 million Gen Zers between 21 and 25 years old, 57% have at least one credit card, with 25% holding two or more.

That’s a lot of room for credit card growth.