Lenders’ worst fears were not realized
The expected surge in delinquencies and defaults never came in 2020 or 2021—thanks in large part to government aid such as stimulus payments and expanded unemployment benefits—so lenders steadily loosened their credit standards as 2021 progressed. Last summer included an especially robust set of introductory bonuses, too.
At the time, many thought the pandemic was coming to an end, thanks to widespread vaccine availability and a sharp drop in COVID cases. The competition was particularly intense on travel credit cards. Card issuers sought to capitalize on Americans’ desires to emerge from lockdowns, reconnect with family and friends and check destinations off their bucket lists.
Popular travel cards such as The Platinum Card® from American Express, the Chase Sapphire Preferred® Card, the Capital One Venture Rewards Credit Card and the Citi Premier® Card all dangled record-high sign-up bonuses in front of travel-starved consumers.
Not to be left out, the cash back category roared back to life as well with the debut of compelling cards such as the Wells Fargo Active Cash℠ Card and the Citi Custom Cash℠ Card.
Even the previously sleepy 0 percent balance transfer space rebounded with interest-free terms lasting as long as 21 months.
COVID isn’t gone, but things seem to be getting better
Sadly, the pandemic wasn’t over in mid-2021, but demand for credit cards remained strong. While the Delta and Omicron variants led to dramatic increases in COVID cases during the fall and winter of 2021 and 2022, each successive wave seems to have had a less significant effect on Americans’ finances.
Delinquencies and defaults on credit cards and other financial products have remained very low, the unemployment rate is way down and the economy has been growing at a solid pace. Card issuers seem to be feeling good about the current state of affairs. In fact, their biggest complaint appears to be that too many cardholders are paying down their balances (although that trend has begun to reverse, which is more profitable for banks and less desirable for consumers).
Sign-up bonuses aren’t quite as lofty now as they were last summer and fall, but they’re still good. Demand for new credit cards has remained high, and virus cases have dropped significantly.
Are we entering a second Roaring Twenties?
While we don’t know for sure if Omicron is the last big wave of the pandemic, we have more tools to fight the virus than ever before. Plus, the populace has grown even wearier of COVID restrictions. There’s tremendous pent-up demand to re-engage in activities such as travel, dining and attending concerts and sporting events.
There’s ample data to support the optimistic theory that we’re about to embark upon a second “Roaring Twenties.” For example, Bank of America says its credit card customers spent 28 percent more in January 2022 than they did one year prior. Goods sales have been remarkably strong throughout the pandemic, but spending on services has been weaker.
It seems that an increase in service purchases is likely as more people feel comfortable leaving their homes. And traditionally, Americans have been more apt to put travel, dining and other discretionary expenses on credit cards, often opting for cash and debit cards for everyday essentials such as groceries and gas.