The payment sector has evolved over the last few years. Credit card usage is up and there have never been more options when it comes to choosing the best credit card.
Security breaches may make the headlines, but there have been a ton of changes to the payment industry that should get you excited. Improved technology has brought on new features, and the shift towards convenience has played a major role in the way we spend. Here are the credit card trends to look out for in 2016.
In the last year, Aeroplan, Avios, SCENE, and TD Rewards all made changes to their programs, which negatively impacted consumers. Some decided to up the amount of points required to claim rewards, while others devalued their current point system. To be fair, most of these programs started to offer additional services, or they enhanced their current ones, but nothing annoys people more than having their points devalued.
Back in 2014, credit card companies agreed to limit their interchange fees – the amount they charge retailers to process transactions – to 1.5% for five years. It’s no coincidence that the negative changes to rewards programs happened shortly after so it wouldn’t be a surprise if this trend continued into 2016.
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Cash back is king
With rewards losing their appeal, consumers may start looking at cash-back cards. The Tangerine Money-Back Credit Card is expected to be available to everyone later this year. The new no-fee card offers 2% cash back on two categories you choose (for example, groceries, drug stores, entertainment, hotel accommodations, etc.) and 0.5% cash back on all other purchases. The rewards are paid out automatically each month and can be applied to your card balance or deposited into your Tangerine savings account. If you choose the latter, you can choose a third 2% cash-back category. The card instantly becomes arguably the best no-fee cash-back credit card on the market. Hopefully other credit card providers will take notice and improve their offerings, but that’s unlikely to happen.
For premium credit card users, the Scotiabank Momentum Visa Infinite card is still at the head of the class. It offers 4% cash back on gas and grocery purchases, 2% for drug store purchases and recurring bills, and 1% on everything else, which is hard to beat. With cash back you don’t need to worry about accumulating enough points to claim a reward, or the value of your points dropping.
- Earn 2% Money-Back Rewards on purchases in up to three 2% Money-Back categories of your choice, and 0.5% Money-Back Rewards on all other purchases
- No annual fee for yourself and additional cardholders
- Accepted at Costco and all Loblaws stores
Although delinquency rates dropped in 2015, multiple reports found that credit card debt increased which is a troubling sign. It’s impossible to predict what will happen in 2016, but debt repayment should always be on the minds of Canadians. The financial services industry has put an emphasis on financial literacy, but it’s up to us to get our debt under control.
More emphasis on security
With thieves getting smarter, credit card security and fraud awareness is becoming much more important. Capital One is currently in beta with its Second Look program, which helps keep an eye on unusual, duplicate, and auto-renewal charges automatically. It’s easy for regular consumers to miss small additional charges, so Second Look’s algorithms will alert you if they spot something suspicious. Capital One cardholders can expect a full rollout sometime later in the year.
Consumers shouldn’t rely just on credit card providers to catch fraud for them. Anyone can be a victim so get into the habit of checking your statements on a weekly basis. Don’t forget that you can order a free credit report from Equifax and TransUnion once a year.
With Apple Pay now available in Canada, will 2016 finally be the year where the mobile wallet makes a breakthrough? Not exactly, Apple Pay is currently limited to just American Express-issued cards, and you must have an iPhone 6 or 6s. Google Wallet users continue to grow since people are becoming more comfortable using their phones as a payment system. Merchants are also starting to make a push into the mobile stream by introducing their own apps that allow you to pay quickly. Consumers are looking for convenience and the mobile wallet is something to keep an eye on.