The year 2011 was not only the first full year in which we enjoyed CARD Act-borne transparency and consumer rights, but as the country continued its economic recovery, we also saw unemployment fall, credit availability rise, and an influx of extremely attractive credit card offers.
In light of the precarious European debt situation and the looming threat of a double-dip recession, however, many people are wondering whether 2012 will resemble its immediate predecessor or signal a regression into the of economic woes of years past. With that being said, let's take a sneak peak at what 2012 holds for your wallet.
1. There will be more of the same in Europe. Yes, the European debt crisis remains unresolved, but there are really only three possible outcomes: a long-term solution will be reached (unlikely); nations like Greece, Italy, and Spain will default (also unlikely); or steps will be taken to buy more time for a lasting resolution to be reached (likely). While perhaps anticlimactic, we shouldn’t expect Europe to have much of a negative impact on the U.S. credit industry, which means continued economic growth.
2. Credit scores are looking up. For your credit score to rise, positive information must be added to your major credit reports on a consistent basis. This comes from (among many other things) paying your bills on time, which itself depends on having an income. Therefore, the fact that unemployment was significantly lower in 2011 than in 2010, reaching a 32-month low in November, indicates that credit scores will rise in 2012.
3. You can say goodbye to debit cards and hello to prepaid cards. This is a case where you must comprehend history to fully understand the present and the future. The Dodd-Frank Wall Street Reform and Consumer Protection Act took effect in 2010, the debit card interchange fee cap that the law’s Durbin Amendment directed the Federal Reserve to explore was officially put in place on Oct. 1, 2011, and the resulting dominos will continue to fall in 2012. In other words, debit cards will be less prevalent as consumers get used to their diminished rewards and increased fees, more and better prepaid card options will be available, and consumers will use rewards credit cards as well as prepaid cards more often.
4. No significant personal finance legislation will be passed. The last few years have marked the implementation of various new personal finance laws, including the aforementioned Dodd-Frank Act and the Credit CARD Act of 2009. The success of these laws, combined with the upcoming presidential election, should mean that no additional legislative changes will be witnessed in 2012, however.
[See 6 Steps to Dig Out of Debt.]
5. Credit card sign-up offers won’t go away. It has become common for credit card companies to offer bonus rewards or 0% introductory APRs to people with good or excellent credit who open new accounts and charge a certain amount during the first few months. Issuers use these offers to add stable consumers to their customer bases; consumers use them to garner hundreds of dollars in goods or cash and/or save a ton of dough in interest. While these deals have generally been positioned as limited-time promotional offers, you needn’t worry because they will be around in 2012. The particulars might be different, but the ability to save will stay the same. Oh, and you might think that good-to-excellent credit encapsulates a small percentage of U.S. consumers, but actually about 50% of people have good credit or better.
6. More credit will be available. It’s not only people in the upper echelons of credit standing that will benefit in 2012. People who’ve experienced difficulty getting approved for a loan or credit card the past few years could very well see their fortunes change in the coming year. The reason for this is simple: Credit card companies are seeing their profit margins rise, which means they can be more liberal in their application approval processes.
I don’t have a crystal ball, so I can’t guarantee that these things will indeed occur. But, all in all, 2012 is shaping up to be better than 2011.