Many consumers are still getting help with debt

At the end of December 2020, around 2.87% of accounts in the auto, credit card, mortgage or unsecured personal loan accounts were still in some form of financial hardship status.

But the percentage of accounts in that status continue to fall from a high of 4.77% in May 2020, according to TransUnion’s Financial Services Monthly Industry Snapshot Report.

TransUnion data includes all of the accounts with accommodations at the end of December plus those that had accommodations pre-pandemic.

The percentage of credit card accounts in financial hardship status fell from a high of 3.73% in May 2020 to 2.42% in December 2020. 

Repayment preferences vary

Among those consumers with loan accommodations, plans to repay the money were diverse, according to TransUnion.

The research showed that around 25% of them want to return to making regular payments and negotiate with lenders to increase the length of the loan, while 19% would like to continue the accommodation and 17% want to catch up by making bigger payments.

See related: Credit card spending rebounds from pandemic plunge

Delinquencies and hardship program situation surprisingly positive

Ted Rossman, industry analyst for CreditCards.com, said that in general, the outlook for delinquencies and hardship programs is surprisingly positive.

“Delinquencies have actually fallen during the pandemic and fewer customers than we initially expected have enrolled in hardship programs, plus many have already gotten back on track,” Rossman said.

For example, Chase reported that more than 90% of customers who exited their assistance program have remained current on their payments.

And, according to the ABA Banking Journal, “Bank card delinquencies fell 109 basis points to 1.52% of all accounts in the second quarter, declining to the lowest level on record. In the third quarter they were essentially flat.”

Rossman noted that government stimulus programs deserve a lot of credit, along with many consumers spending less and making debt payoff a priority.

“It seemed like the stimulus impact was starting to wane late in 2020, but Congress and the Trump Administration agreed on another round of stimulus right before New Year’s and the Biden Administration is intent on implementing an even larger program soon,” Rossman said.

Rossman said we’re not out of the woods yet, but there’s growing optimism that the worst has passed and we will not see nearly as many delinquencies and defaults as we did during the 2007-2009 financial crisis.

See related: What to do if your credit card is closed due to delinquency

Source: creditcards.com

Amex Platinum temporarily adding $30 monthly PayPal credit

As 2020 ended, we left behind some challenging times – and some valuable credit card perks, like $20 streaming and mobile statement credits the on The Platinum Card® from American Express. (Both expired on Dec. 31, 2020.)

Fortunately, Amex hasn’t left Platinum cardmembers with nothing in the place of the expired perk. On the contrary, the issuer has added yet another exciting benefit.

See related: Amex adds Uber Eats Pass for Green, Gold and Platinum, Uber Cash credit on Gold

For a limited time, Amex Platinum cardholders will be able to enjoy a $30 monthly PayPal credit. While it’s less than the cumulative $40 in monthly streaming and mobile credits the issuer offered late last year, the perk still offers a great value and can be very versatile.

How the new PayPal credit works

Amex Platinum cardmembers will be able to use the new perk through June 30, 2021. No registration is required, and the credit will be applied automatically.

To use the perk, link your American Express Platinum card to your PayPal account and set it as the default payment method. Now, when you shop at eligible online merchants, you can select to check out via PayPal and get up to $30 credited back to you in your monthly statement. You’ll earn Membership Rewards points on this type of transactions as well.

Note, however, that peer-to-peer payments aren’t eligible for this offer, and you also can’t use it on gift card purchases or prepaid card reloads.

Receive up to $880 in credits with Amex Platinum in 2021

This perk is far from the first valuable credit offered on the Platinum card.

The credits on the Amex Platinum include annual Uber credits of up to $200 ($15 per month plus an extra $20 in December), an up to $200 airline-fee credit, up to $100 Saks Fifth Avenue credits per year, a $100 Global Entry or $85 TSA Precheck application fee credit every four years and a $100 hotel credit every time you book with The Hotel Collection.

The $30 monthly PayPal credit will be available through June – for up to $180 in PayPal credits in total.

The newly added limited-time perk brings the total credits you can receive from the Amex Platinum up to $880 in 2021 (if you only use the hotel credit once).

Considering the card’s annual fee is $550, you can get a lot of value from your Amex, especially if we get to see travel finally coming back this year.

Bottom line

The new $30 monthly PayPal credit on Amex Platinum may be less valuable than the discontinued $20 streaming and mobile statement credits, but it’s versatile and easy to use – PayPal checkout is available at thousands of online retailers, including major ones, such as Walmart, Target, Home Depot and others.

Coupled with other credits and perks the Amex Platinum offers, the new benefit drives up the value of the card, making it a travel credit card that’s worth it to have even in the times when travel is limited.

Source: creditcards.com

My 2021 credit card predictions

In 2020, the coronavirus pandemic brought a huge shift in spending as the country shut down. The travel industry specifically took a hit, and many card issuers responded by adding rewards on everyday spending to travel cards.

While I think travel spending will eventually rebound in 2021, it seems likely that the additional perks on everyday spending are here to stay.

Read more from our credit card experts.

Ask Ted a question.

Everyday spending

Early on in the COVID-19 pandemic, many card issuers pivoted to grocery spending, food delivery and takeout, streaming services, home improvements, and other everyday spending categories out of necessity. In 2021 and beyond, I think they’ll do so by choice.

These perks really seem to be resonating with consumers, whether we’re talking about earning bonus rewards for these types of spending, redeeming points or miles at a higher than normal ratio to offset related purchases, receiving free premium memberships for services such as DoorDash and Instacart, or getting statement credits to defray eligible costs.

It all adds up to cash back with a twist. There’s an experiential component that cardholders love and habitual aspects that appeal to card issuers trying to build loyalty. If you’re more likely to use a card that offers these perks – especially if you’re willing to pay an annual fee – that’s a win all around.

See related: Guide to Chase Pay Yourself Back

Travel

Necessity is the mother of invention, of course, and the fact that the pandemic crippled travel led to many of the aforementioned incentives. I expect travel to bounce back in a big way once we have widespread vaccine availability. Late Q2 or early Q3 seems like a good bet, according to health experts.

This should unleash an incredible amount of pent-up travel demand. People want to see their families and friends, they want to explore bucket list destinations and many will have money (and points and miles) to burn after a year of lockdowns.

I expect the good deals will last for a while because it’s a competitive industry, and business travel should remain depressed longer than leisure travel. Airlines will want to pack planes, hotels will want to fill rooms and cruise lines will be especially desperate for business. We should see favorable prices along with other incentives to liquidate rewards and sign up for travel credit cards.

Approval standards

In 2020, lenders became much more risk-averse as the pandemic created a ton of uncertainty and job losses. In Q2, 72% of credit card issuers tightened their approval standards and 0% eased them, according to the Federal Reserve’s Senior Loan Officer Survey. In Q3, 31% tightened and 4% eased. A similar trend played out with respect to existing cardholders’ credit limits.

This hit balance transfer cards the hardest. According to Mintel Comperemedia, card issuers sent 42% fewer direct mail advertisements for 0% balance transfer cards in the first three quarters of 2020 when compared with the same period in 2019. Card issuers were worried enough that their existing customers wouldn’t pay them back; taking on new customers with existing debt wasn’t particularly appealing.

This will hopefully turn around in the second half of 2021, assuming we have widespread vaccine access and a better economy and job market. I think balance transfer cards will be the last card sector to bounce back, however.

sign-up bonuses. But approval standards will likely remain tight as issuers look for the most creditworthy and affluent applicants. We saw some of this in late 2020, like the 100,000-mile Capital One Venture Rewards Credit Card bonus (since expired) which required $20,000 of spending within the new cardholder’s first 12 months.

I think particularly lucrative bonuses will become more widely available and less restrictive in the second half of 2021. Early in the year, the best offers will probably be reserved for those with high credit scores and high incomes.

Final thoughts

A couple of pleasant surprises this year: Credit card debt and delinquencies both fell in 2021. Credit card debt declined 11% between February and October, according to the Fed. This could be due in part to the government stimulus package passed earlier this year or consumers spending less and prioritizing paying down debt.

While we’re all anxious for our lives to return to normal, carrying less credit card debt would be a good habit to hold onto after the pandemic is over.

Have a question about credit cards? E-mail me at ted.rossman@creditcards.com and I’d be happy to help.

Source: creditcards.com