Big banks in the U.S. are ramping up their promotions to encourage credit card holders to spend more, hoping to make up for last year's decreased revenue as consumers cut back during the pandemic.

Key Takeaways

  • Credit card spending dropped from all-time highs during 2020 due to the coronavirus pandemic and the ensuing economic downturn.
  • In a reversal of their moves to limit risk exposure last year, big banks are now offering more promotions to incentivize sign-ups and spending. 
  • Both new and existing cardholders should be on the lookout for offers.

Card Issuers Loosening Limits, Adding New Offers

The coronavirus pandemic wreaked havoc on the U.S. economy, and partly as a result, total credit card balances fell by $157 billion, according to data released by the Federal Reserve Bank of New York.

But consumers weren't the only ones acting more conservatively with their money. Many credit card issuers cut credit limits, balance transfer offers, and other benefits to limit their exposure to losses—which ended up not happening, thanks to government relief in the form of stimulus checks, enhanced unemployment benefits, and the Paycheck Protection Program.  

But while the credit card business was still profitable, revenue was down, and big banks are now looking to ramp it back up again.

Earlier this year, for instance, American Express announced several new Amex Offers for eligible cardholders, as well as monthly credits for things like wireless telephone services and dining, including takeout and delivery. 

More recently, Chase launched bonus rewards offers on many of its co-branded credit cards for existing cardholders, increasing rewards rates on eligible purchases for a period of time.

Capital One has also begun gradually increasing credit limits to provide more spending power to its customers.

However, major credit card issuers have yet to outline their next steps, so consumers should watch out for offers on their existing credit cards, as well as on new cards they might be interested in.

Avoiding the Temptation to Overspend

Consumers who get a new offer on an existing account or see one on a card they've had their eye on may want to take advantage of it while they can. But as with any credit card decision, it's important to avoid overspending for the sake of points and miles. 

The median credit card interest rate across all credit cards in the Investopedia database is 19.62% as of May 2021. And because credit cards encourage staying in debt with their low minimum payments, it's easy to pile on more of it.

So before applying for a new card with a sign-up bonus, for instance, consumers should run the numbers to make sure they can meet the minimum spending requirement without charging more than they normally would. Similarly, if they receive a promotion on an existing card to earn more rewards on certain purchases, they'll want to avoid the temptation to overspend in that category just to maximize the offer.