This year you may see more sustainable credit cards, new travel cards and expanded buy now, pay later programs. And credit card debt may be on the rise.
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Each year, CreditCards.com asks experts what changes they expect to see in the credit card industry.
Read their predictions and use them to decide what your credit card strategy and overall finances might look like in 2022.
Homeowners might leverage their equity to consolidate credit card debt
Joseph Toms, president and chief investment officer at Freedom Financial Asset Management in San Mateo, California, predicted that consumers who are homeowners leveraging the meteoric rise in their home values will consolidate their credit card debt and reduce their interest burdens.
The gap between credit card and mortgage rates remains near an all-time high, Toms said. With mortgage rates so low right now (and credit card rates so high), many homeowners can opt for a home equity line of credit or do a cash-out refinance to get additional cash at very low rates.
Toms added that the end of student loan debt forbearance programs coming may impact credit card debt as well. For those who won’t have enough cash to make their student loan payments, he said, it’s likely some of them will resort to using credit cards to pay the debt (or to pay for other expenses) so they have cash for the student loan payments.
Toms said that’s counterintuitive because the interest rate on credit card debt (which could be as high as 24%) is much higher than on student loan debt (typically 7% to 9%). A more financially prudent move would be to negotiate repayment terms with the student loan servicer, he recommended.
There could be more cryptocurrency-backed credit cards
This year we’ve seen the introduction of credit and debit rewards cards from many leaders in the crypto market, including BlockFi, Coinbase and Crypto.com, said Shaun Heng, vice president of growth and operations and chief of staff at the website CoinMarketCap.
The trend of cryptocurrency-backed credit and debit cards, he said, is set to continue growing into next year.
“We heard in October that Mastercard is integrating cryptocurrency payments for thousands of its banking partners, and other banks may be making similar moves in 2022 as they look to curb the growing threat of competition from cryptocurrencies,” Toms said.
Contactless payments may be on the rise
Michael Cummins, director of finance of Insurance Geek, said he expects contactless payments to go gangbusters in 2022.
“With COVID, every merchant’s main goal was to ensure that customers could stay safe while still shopping with them, and contactless payments were that saving grace,” Cummins said.
Now that this method has been adopted and implemented for so long, he said he doesn’t see it slowing down anytime soon, especially with people increasingly using methods like Apple Pay and Google Pay to make in-store and online purchases.
There will likely be more sustainable credit cards
Lana Khabarova, founder of SustainFi, a sustainable investing and personal finance platform, said she thinks there will be more sustainable credit card offerings in 2022.
“Concern about climate change among millennials and Gen Z members, in particular, is very high, and financial services providers are responding,” she said.
Some companies are promoting the material their cards are made of, Khabarova said, typically using more sustainable recycled plastics or even wood.
Aspiration just launched Aspiration Zero, the first carbon-neutral credit card – the company plants trees every time you buy something. In addition, American Express offers the Green Card, made from 70% reclaimed plastic collected from beaches, islands and coastal communities.
Buy now, pay later could expand
Western markets continue to be some of the most innovative in the world in terms of credit payments, said Scott Nelson, CEO of MoneyNerd Limited.
In particular, he added, there has been a substantial expansion in the use of buy now, pay later (BNPL) payments, which many used during COVID to not take on more credit card debt.
Nelson expects that even as COVID winds down, buy now pay later plans will gain even more popularity as additional consumers start using these often interest-free loans with fixed payment schedules.
Credit card debt might ramp up
“I expect credit card debt will continue to ramp up in the fourth quarter of 2021, drop a little in the first quarter of 2022 and then gradually climb to pre-COVID levels,” said Andrew Latham, certified personal finance counselor and managing editor of SuperMoney.
Consumer credit card debt typically tends to follow the same seasonal pattern. It increases modestly in the second and third quarters and more dramatically in the fourth quarter, he added.
In the first quarter, credit card debt usually drops as consumers try to pay off holiday splurges. This pattern was reversed in 2020 when credit card debt levels dropped in the second and third quarters and only increased by $10 billion in the fourth quarter.
The latest report from the Federal Reserve showed that credit card balances increased again by $17 billion in the third quarter of 2021. However, Latham pointed out, the total consumer credit card debt ($800 billion) is still $130 billion lower than in the fourth quarter of 2019 ($930 billion).
It seems likely that as COVID relief peters out and pandemic restrictions are lifted, Latham said, “We will return to pre-COVID credit card usage trends.”
Perks could be plentiful
Matt Campbell, CIO and financial planner at Budgetable, expects credit card issuers to offer far more perks than they used to for 2022, particularly for their entry-level cards.
In years past, a single 100,000-mile sign-up bonus might be enough to get someone to sign up. Now we’re seeing five to six different perks, such as travel planning services, airport lounge access and free TSA PreCheck and Global Entry.
“I believe that the flyer mile perks have been so overdone that creditors are looking for new benefits that will catch potential customers’ attentions,” Campbell said.
Travel cards could be more popular than ever
Melanie Pitman, personal finance expert and content specialist at the Canada-based website creditcardGenius, said that thanks to lockdowns, isolation and the need for travel bans during the worst of the COVID-19 pandemic, people are itching to get out and see the world.
Vacation travel and business trips have only recently resumed as rising vaccination rates mean we’re finally able to leave our hometowns, she said. “Because of this, there has been increased interest in travel credit cards, and I predict they’ll be even more popular in 2022,” she said.
Now that you’ve read what the experts expect in the credit card industry in 2022, you might want to use their predictions to benefit you. For example, if you plan to travel in the coming year, keep an eye out for a great new travel card. Or, if want to help the environment, consider applying for a sustainable card. The more you stay abreast of credit card changes and opportunities, the more likely you are to stay financially healthy, regardless of whatever changes might occur.
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