As of June 2021, credit card payments made up 82.1% of all retail transactions, globally increasing from 78.7% in early January. This increase has been a steady one for some time now, with financial news website Business Insider forecasting that global credit card payments will reach $1.82 trillion a year in the next three years.
However, this still begs the question: Why is credit card use becoming more prevalent? Below, we have listed three key reasons.
Convenience and Safety
With the pandemic forcing people to keep their distance, touchless payments have become the norm for many businesses. Visa reported that its tap-to-pay transactions increased by over 30% compared to last year due to the public demand for safer contactless methods of payment. Many of these transactions were made using a credit card.
In our previous post ‘What Happens When You Can’t Pay Your Bills’ by Dean Kaplan, CEO and President, The Kaplan Group, he discussed how opening a line of low-rate credit allows the user to settle balances while still keeping a steady cash supply. This allows credit card users to manage their monthly budget much easier.
An attractive feature of using a credit card is the rewards programs. And with more people using credit cards than ever before, providers are making their credit incentives better than ever. For instance, Citi Premier presents a generous sign-up bonus after an accumulated $4,000 purchase within the first three months. These points can be redeemed for gift cards, merchandise, and even travel fees.
This demand for credit cards has led to new card providers offering unique services in order to be competitive. Credit provider Petal Card allows their cardholders to earn 1% cashback on all purchases. There’s even cashback to be earned from simply paying on time, as well as a mobile app designed to help users manage credit responsibly. These perks are incentivizing people across the globe to use their credit cards more often, contributing to the payment channel’s growth.
Because of the increased credit card usage mentioned, research by Aite Group noted that at the end of 2020, there was about $11 billion worth of losses due to card fraud in the US alone. And they predicted that this trend will continue over the next couple of years across the globe.
Fortunately, credit card providers are taking the next step towards security this year. Newer Mastercard and Visa credit cards now have EMV chips and magnetic stripes incorporated into them to better encrypt card transactions. Mastercard found that counterfeit card fraud was down by over 60% at its top five EMV-enabled merchants. Many, if not all, credit card providers today also ask for multifactor authentication, or additional security layers like one-time passwords and biometrics, before processing transactions online.
With credit cards being an increasingly convenient, secure, and rewarding method of payment, more and more consumers are encouraged to sign up for one. In the future, it could even overtake cash and debit usage completely.