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CardHub.com’s Credit Predictions for 2013

"Credit Predictions for 2013" We know what the past few weeks have held for us: mistletoe, gifts, great food, and holiday cheer. But what about after the clock strikes midnight on New Year’s Eve? While it’s impossible to know for sure, Odysseas Papadimitriou – the CEO of the credit card comparison website CardHub.com and a personal finance veteran who previously served as a senior director in Capital One’s credit card division – has offered some educated predictions for what 2013 holds for consumers’ wallets.

1. The “fiscal cliff” won’t impact consumers

Odysseas Papadimitriou (OP): “It doesn’t matter what side of the aisle you sit on, no one wants to take a flying leap off the ‘fiscal cliff’ and feel what the bottom is like. That doesn’t necessarily mean we’ll see a resolution before the clock hits zero, but even if it comes a few days later, there won’t be any lasting repercussions and consumers’ wallets won’t feel any negative effects. Sure, there might be some market fluctuation between now and then, much as there was when the debt ceiling dominated the discussion on cable news shows, but you can bet that the impending crisis will be averted or, perhaps more accurately, postponed – again, similar to the debt ceiling situation.”

2. Mobile wallet technology won’t catch on

(OP): “There was a lot of buzz surrounding mobile wallets in 2012, and while consumers might be excited about this new technology and the prospect of having one less item to carry around, widespread adoption isn’t going to happen in 2013. There are just too many factors conspiring against it. From lingering security concerns to market fragmentation and unsatisfied infrastructure requirements, there are a number of pretty big dominoes that need to fall first.”

3. Overall credit availability will increase

(OP): “The $43.5 billion in credit card debt that Card Hub projects U.S. consumers will ultimately incur in 2012 is a clear sign that credit is easier to come by than in 2011. As the economy continues to improve and unemployment falls, this trend will continue. Hopefully we can leave the debt in the past, though. Balance transfer credit cards, credit card calculators, secured cards, and good old fashioned budgeting can all make spending within your means significantly easier.”

4. Credit card companies will continue offering lucrative sign-up offers

(OP): “While the length of 0% APRs seems to have peaked, 0% credit cards, as well as those with lucrative initial rewards bonuses, aren’t going anywhere. Banks know how important it is to attract the most dependable consumers – those with excellent credit – and these marketable deals have proven quite successful thus far. That’s great news for consumers, as you can get an initial rewards bonus of up to $500, 0% on new purchases for up to 18 months, or a free balance transfer deal that could lower the cost of your debt by up to $1,000.”

5. Secured credit cards will continue to become more popular

(OP): “The CARD Act essentially killed unsecured credit cards for people with bad credit by limiting the fees issuers can charge during the first year an account is open. Secured credit cards have filled the void and are in fact preferable since the security deposit you’re required to place to open one acts as your credit line, thereby preventing you from overspending and protecting issuers financially. The secured card market should grow in 2013 as people become more familiar with them and issuers have time to develop new offers. Interestingly, secured cards could also be the solution to the issue of stay-at-home spouses being unable to independently build credit, assuming federal regulators realize how simple such a remedy would be and eliminate redundant income verification requirements for this card segment.”

6. There will be a prepaid card boom

(OP): “Prepaid cards have long been the sleeping giant of personal finance, slowly becoming more popular without much fanfare. Well, the Durbin Amendment woke that giant up by capping debit card interchange fees and thereby blocking a $9.4 billion annual revenue source for banks, forcing them to search for alternatives. Prepaid cards are a natural fit since they offer pretty much the same functionality as the combination of a checking account and debit card yet are unregulated. As a result, we saw big banks like Chase and American Express enter the space in a huge way during 2012 as well as big-name celebrities like Suze Orman and Magic Johnson sign on as prepaid card endorsers. The momentum will carry over and in fact build in 2013, as consumer familiarity grows and more banking superpowers follow the lead of early adopters.”

7. Transparency will increase throughout financial services

(OP): “Transparency was a major issue in the credit card market prior to and during the Great Recession, but the CARD Act eliminated many of the ills that pervaded the space, including arbitrary interest rate repricing, unfair payment allocation, and double-cycle billing. It’s now the rest of personal finance’s turn. The Consumer Financial Protection Bureau has put credit bureaus and debt collectors under the microscope already, and you can count on prepaid cards and checking accounts getting some attention in the near future. This regulatory scrutiny will be nothing but beneficial for consumers.”

8. Check cashing stores will continue to trend toward extinction

(OP): “Anyone familiar with check cashing stores knows how costly they tend to be. Historically, unbanked consumers had to grin-and-bear-it with high fees because that was the price of having no other options when it came to collecting a paycheck. However, a number of low-cost prepaid cards enable consumers to load checks directly using ATMs or mobile banking applications and therefore serve as the death knell for check cashing businesses, or at least their traditional fee structures.”

Bonus (the prediction we wish we could make): Insurance will be regulated at the federal level

(OP): “Federal insurance regulation would help streamline a very important industry that is regulated at the state level and thus eliminate overhead, promote competition, and invite increased scrutiny from both the media and the government. It would therefore promote a healthier market marked by increased transparency and consumer rights as well as decreased costs. It’s just not going to happen. The lobbying efforts of the big insurance companies will ensure that the barriers to entry remain artificially high.”

For more information on Card Hub’s Predictions (plus our grades on last year’s predictions), please visit: http://www.cardhub.com/edu/credit-predictions-2013/

 

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