As consumers pay off credit card debt, banks are likely to offer credit incentives
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We’ve been reporting on falling credit card balances in the pandemic. People haven’t been spending as much and many have been paying off their balances with those savings. But now that the economy’s reopening, credit card companies are likely to try to push those balances back up again.
Credit card companies earn revenue from the interest they charge if users carry a credit card balance, as well as from fees for things like late payments. “For the bank, the combination of that interest income and the fee income can be very important if credit cards are a big part of their loan portfolio,” said David Yermack, a finance professor at NYU.
This year, credit card companies have been stepping up their marketing campaigns, ” … both in digital marketing, and also in direct marketing. We’re seeing offers for credit back to pre-pandemic levels,” said Andrew Davidson, who follows credit cards at Comperemedia.
Since people have been good about paying off their balances, he said, consumers’ credit scores have improved. So card companies are sweetening their offers with incentives like better interest rates.
“Better rewards, more attractive APRs, better terms for financing,” Davidson said.
As a result, Davidson said, demand for credit credit cards is likely to rise, too. Especially if consumer spending continues to go up.
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