|Biz Predictions for 'Cliff,' Credit Cards|
|By ALAN FARNHAM||Dec 6, 2012, 7:40 AM|
When psychics gaze into a crystal ball, the vision that they seek usually answers a question like: Will Betty love me? Few inquire after credit markets, the fiscal cliff or mobile wallets.
Odysseas Papadimitriou, however, is no psychic. He is CEO of Card Hub, a credit card comparison site. He also is a former senior director of Capital One's credit card division, and, as such, is uniquely qualified to predict whether credit will be any easier to get in 2013 than it was in 2012 or whether card companies will offer still-juicier sign-up incentives.
ABC News asked him for his 2013 predictions. Here is what he sees -- dimly, as through a veil:
The Fiscal Cliff: How Will It Affect Consumers?
It won't, says Papadimitriou.
"It doesn't matter what side of the aisle you sit on," he says, "No one wants to take a flying leap off the 'cliff' and feel what the bottom is like. That doesn't necessarily mean we'll see a resolution before the clock hits zero, but even if it comes a few days later, there won't be any lasting repercussions and consumers' wallets won't feel any negative effects.
"Sure, there might be some market fluctuation between now and then, much as there was when the debt ceiling dominated the discussion on cable news shows," he adds. "But you can bet a crisis will be averted or, perhaps more accurately, postponed, similar to the debt ceiling situation."
Will We All Be Packing Mobile Wallets?
"There was a lot of buzz surrounding mobile wallets in 2012," he says. "But while consumers might be excited about this new technology, widespread adoption isn't going to happen in 2013. There are just too many factors conspiring against it, from lingering security concerns to market fragmentation and unsatisfied infrastructure requirements. A number of dominoes will need to fall first." Read more: Five Tips for Safe Online Shopping
Will Credit Be Any Easier or Harder to Get?
"The $43.5 billion in credit card debt that Card Hub projects U.S. consumers will ultimately incur in 2012 is a clear sign that credit has been easier to get this year than last," he says. "As the economy continues to improve, and as unemployment falls, this trend will continue."
Will Sign-Up Incentives for Credit Cards Get Juicier?
They won't get any less so.
"While the length of 0 percent APRs seems to have peaked, 0 percent credit cards, as well as those with lucrative initial rewards bonuses, aren't going away," he says. "Banks know how important it is to attract the most dependable consumers -- those with excellent credit -- and these marketable deals have proven quite successful thus far."
Consumers, he adds, will continue to be able to get initial rewards bonuses of up to $500, 0 percent on new purchases for up to 18 months, and free balance transfer deals that can save them up to $1,000.
Will Banks Push Prepaid Cards?
Yes, because prepaid cards will fill an income void.
"Prepaid cards have long been the sleeping giant of personal finance, slowly becoming more popular without much fanfare," he says. "Well, the Durbin Amendment woke that giant up by capping debit card interchange fees and thereby blocking a $9.4 billion annual revenue source for banks, forcing them to find alternatives. Prepaid cards are a natural fit and are unregulated."
In 2012, he says, Chase and American Express got into prepaid cards in a big way.
"The momentum will carry over and build in 2013 as consumer familiarity grows and as more banking superpowers follow the lead of early adopters," he adds.
Which Financial Services Will Become More Transparent?
Probably checking accounts and prepaid cards.
"Transparency was a major issue in the credit card market prior to and during the Great Recession, but the CARD Act eliminated many of the ills that pervaded the space, including arbitrary interest rate re-pricing, unfair payment allocation and double-cycle billing," he says. "It's now the rest of personal finance's turn. The Consumer Financial Protection Bureau has put credit bureaus and debt collectors under the microscope already, and you can count on prepaid cards and checking accounts getting some attention in the near future."
Check Cashing Stores: Extinct?
Ones that keep charging high fees will risk becoming so.
"Anyone familiar with check cashing stores knows how costly they tend to be," he says. "Historically, unbanked consumers had to grin and bear it with high fees because that was the price of having no other options when it came to collecting a paycheck."
Now, however, a number of low-cost prepaid cards enable consumers to load checks directly using ATMs or mobile banking applications, thereby letting consumers bypass high-fee cashing services.
That's bad news, Papadimitriou says, for companies like ACE Cash Express.