4 Credit Card Trends for 2021

I've been spending some time gazing into my credit card crystal ball, and I've noticed a few trends on the horizon. And don't worry -- they're actually positive trends!

Before the COVID-19 pandemic hit in early 2020, the economy was doing well. The Bureau of Labor Statistics reported that unemployment was only 3.5% in February.

But the economy took a turn for the worse when many businesses were ordered to temporarily close to reduce the spread of the virus. As a result, many Americans lost their jobs. In June 2020, the unemployment rate was an unbelievable 11.2%.

A survey from TransUnion, The COVID-19 Pandemic's Financial Impact on U.S. Consumers, showed that as of Nov. 30, 21% had lost their jobs. And 41% reported that their work hours had been reduced.

It's understandable that skepticism abounds given the financial misery many have gone through. These issues won't go away quickly, but there's reason to be optimistic about next year.

Let's take a look at four credit card trends that could improve your finances in 2021:

-- Credit card access will improve.

-- Balance transfer credit cards will make a comeback.

-- Consumer credit card debt will decrease.

-- Travel rewards credit cards will compete for your business.

Credit Card Access Will Improve

With the COVID-19 vaccine available to many in the coming months, businesses that have suffered will begin the journey back to normalcy.

As businesses rebuild, the economy will start showing signs of life. A healthy economy leads to job opportunities and promotes consumer spending. This all won't happen quickly, of course. But by the summer, when the unemployment rate improves more, credit card issuers will feel less risk-averse. As issuers feel confident in an economic recovery, credit-approval standards will return to pre-COVID-19 levels.

I've been telling everyone all year that credit is tight, which means it's difficult to get approved for a credit card or to get a credit limit increase. But by the middle of next year, you might be able to get a new rewards credit card or get a limit increase on a current card. And no, I'm not suggesting a spending spree!

[Read: Best Cash Back Credit Cards.]

Even though credit will loosen, it will still be essential to maintain a high credit score. What if the vaccine doesn't go as planned and the economy is shut down again? Hopefully, that won't happen, but it's important to continue to play a little credit self-defense until we know the pandemic is under control.

A new credit card or a higher limit gives you more available credit. This can lower your credit utilization ratio, which is the amount of credit you've used compared with the amount you have available. The lower your ratio, the higher your credit score. So, think of increased access to credit as a safety net.

Balance Transfer Credit Cards Will Make a Comeback

During the past six months or so, it became very difficult to get approved for a balance transfer credit card. Credit card issuers had offered hardship programs to many Americans who couldn't pay their bills due to the impact of the pandemic, so the issuers limited their risk in other areas. The issuers cut back on balance transfer offers and implemented lower credit limits.

I'm already starting to see balance transfer offers come back into the credit marketplace. Now, if you accumulated credit card debt during the pandemic, and you still have very good credit, a balance transfer card is a golden opportunity. You can pay down debt during the 0% annual percentage rate introductory period without paying interest.

Right now, these introductory periods last from 12 to about 18 months. Do keep in mind, though, that most of the issuers charge a balance transfer fee, which ranges from 3% to 5% of the total amount transferred.

[Read: Best Rewards Credit Cards.]

Consumer Credit Card Debt Will Decrease

The most recent totals from the Federal Reserve's Consumer Credit G.19 report show that consumer revolving debt, which is primarily credit card balances, fell 6.7% in October 2020 compared with the previous month. Total revolving debt was $985.1 billion in September 2020 and went down to $979.6 billion in October 2020.

I predict the debt-reduction trend will continue even though consumers might start spending when they feel financially secure again. The reason is because Americans saved record amounts this year. At the end of April 2020, Americans had saved a third of their disposable incomes. By the end of October, savings had slowed to 13.6%, but that's still higher than average. To compare, in October 2019, the savings rate was 7.2%.

We all understood that the best defense against the pandemic and possible job loss was to build up an emergency fund. As everyone's own personal economies start to improve next year, those who racked up debt during the pandemic will begin using some of their savings to pay down debt.

Some will use a balance transfer credit card, but those who don't have good credit scores might dig into their savings to pay off debt. Another option is a debt consolidation loan to get rid of it. Either way, 2021 will be a year focused on debt reduction.

[Read: Best Credit Cards for Fair Credit.]

Travel Rewards Credit Cards Will Compete for Your Business

In the credit card prediction business, rewards are always low-hanging fruit. For years, rewards have been pretty great, but then life, especially our travel plans, got turned upside down. I applaud issuers who pivoted during the pandemic and allowed cardholders to use miles and points for quarantine-related rewards, such as food delivery or streaming services.

You can expect travel to come back by midyear. We'll see signs of it even earlier if the vaccine is as advertised and controls the pandemic. As people emerge from their COVID-19 cocoons, expect to see generous rewards. Credit card issuers will want to dazzle you with rewards to help you overcome your hesitation to venture out into the world again.

I do think that the lifestyle rewards will continue for a while longer because they're popular. Having one rewards credit card that helps you save on travel and helps you pay for Netflix is a pretty great combination for Americans.

For example, Citi has announced a no-annual-fee credit card called the Citi Rewards+ Card. This card offers a variation on the ThankYou rewards program, including two ThankYou points per dollar spent at gas stations and grocery stores (up to $6,000). You get one point per dollar on other purchases.

But here's the new approach: If your purchase is $4, then instead of four points, your dollar amount is rounded up to 10 points. If your purchase is $204, you get 210 points.

This approach is likely to encourage consumers who don't spend a lot to get this rewards card and use it for even small purchases. The idea makes sense because near-prime consumers are a different market, and they're unlikely to be big spenders.

You can expect rewards to continue targeting lifestyle categories, such as dining, entertainment, groceries, and Uber and Lyft rides. The Capital One Savor Cash Rewards Credit Card and Capital One SavorOne Cash Rewards Credit Card are examples of credit cards already in this space. But as the year goes on, you'll also see other credit card issuers offering rewards promotions in these categories.

So, basically, rewards will still be around, but losses due to credit card rewards hackers are piling up for the big issuers. This suggests that we'll see smaller sign-up bonuses to discourage churners from applying for rewards cards simply to earn the bonus. The focus in 2021 will be on the rewards and encouraging consumers to keep using the credit cards.

Lastly, don't forget that I mentioned we need to make this the year to encourage financial literacy. The more consumers who know about credit and debt, the more likely they are to stay financially healthy, regardless of changes in the economy.