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Credit card origins continue at record-setting pace, even as subscription rewards fall

Americans are opening more credit card accounts than ever before. There are only seven months in history with more than 6.5 million U.S. credit cards, and six of them are the last six months reported by Equifax (May to October 2021).

Credit card originations continue at record-setting pace, even as sign-up bonuses dip
Credit card originations continue at record-setting pace, even as sign-up bonuses dip

The only other time was in August 2019, when 6.7 million accounts were opened. The 2021 increase includes the following monthly totals:

May 2021: 6.6 million credit cards established
June 2021: 6.93 million
July 2021: 6.85 million
August 2021: 6.79 million
September 2021: 6.53 million
October 2021: 6.64 million
Compared to January to October 2020, the amount of credit card usage in the first 10 months of 2021 increased by a staggering 46%. Clearly, the 2020 numbers have been controlled by the enormous uncertainty that governs the early stages of the COVID-19 pandemic. Lenders were nervous and that year ended with the latest bank-issued credit card account number since 2013.

However, the production in the first 10 months of 2021 was 4.6% higher than the level in 2019, which is the previous record high water level for any year. And the growth rate is growing rapidly year by year. From May to October 2021, origins increased by about 12% compared to the same period in 2019.

Lenders’ worst fears have not materialised

The rise in debt and defaults is not expected to come in 2020 or 2021 — thanks in large part to government aid such as stimulus payments and expanded unemployment benefits — so lenders have gradually loosened their credit standards as 2021 progresses. Last summer also included a particularly strong set of introductory bonuses.

At the time, many thought the pandemic was coming to an end, thanks to the widespread availability of vaccines and a sharp drop in the number of COVID infections. The competition is particularly fierce for travel credit cards. Card issuers have sought to capitalize on Americans’ desire to get rid of lockdown, reconnect with family and friends, and check out destinations on their team lists.

Popular travel cards such as American Express Platinum Cards®, Chase Sapphire Preferred® Cards, Capital One Adventure Rewards Credit Cards, and Citi Premier® Cards all have record high registration bonus points ahead of travel-hungry consumers.

Not to be missed, the cashback portfolio is also back in full swing with the launch of attractive cards such as Wells Fargo Active Cash® Cards (cash rewards) and Citi Custom Cash℠Cards.

Even the previous 0% balance transfer space has recovered with interest-free terms lasting up to 21 months.

COVID hasn’t gone away yet, but things seem to be getting better

Sadly, the pandemic isn’t over by mid-2021, but demand for credit cards remains strong. While delta and omicron variants have led to a significant increase in COVID cases in the fall and winter of 2021 and 2022, each successive batch appears to have had less significant effects on Americans’ finances.

Debt and defaults on credit cards and other financial products remain very low, unemployment is declining and the economy is growing at a solid pace. Card issuers seem to feel satisfied about the current state of affairs. In fact, their biggest complaint is that too many cardholders are paying off their balances (although that trend has begun to reverse, which is more beneficial for banks and less desirable consumers).

Subscription rewards aren’t as high now as last summer and fall, but they’re still good. Demand for new credit cards remains high and cases of the virus have dropped significantly.

Are we entering our twenties roaring second?

While we don’t know for sure whether Omicron will be the last major pandemic, we do have more tools to fight the virus than ever before. In addition, there are increasing restrictions on COVID. The need to re-engage in activities such as travel, dining and attending concerts and sporting events is being greatly pent up.

There’s a lot of data to support the optimistic theory that we’re about to embark on a second “Boom twenties.” For example, Bank of America said its credit card customers spent 28% more in January 2022 than a year earlier. Sales of goods have increased significantly throughout the pandemic, but spending on services is weaker.

It seems that the purchase of the service will increase as more people feel more comfortable leaving their home. And traditionally, Americans tend to use credit cards for travel, dining, and other discretionary expenses, often choosing cash and debit cards for everyday necessities like groceries and gas.

The bottom line

As your lifestyle and the market continue to grow, this is the right time to review your credit card.

Anyone with credit card debt should prioritize their interest rates, especially with interest rates likely to rise from their already expensive average of 16.28%. A 0% balance transfer card can save you a lot of money if you carry the balance from month to month.

If there is a big trip in the future, you can offset some of those costs with a new travel card. On the other hand, refunds offer general appeal.

Card issuers are competing fiercely for your business, so take advantage by signing up for new cards with low interest rates, attractive subscription rewards, or ongoing attractive rewards.

Do you have questions about credit cards? Email me at ted.rossman@bankrate.com address and I am happy to help.

Written by hoangphat

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