Last updated on April 25th, 2022
With consumers placing more and more spending on their credit cards, credit building strategies and everyday rewards programs are more critical than ever before. In response to these spending changes, card issuers, like TD Bank, and introducing new rewards cards that appeal to everyday spending habits. But what else should we know about the increase in consumer credit card spending and how it can impact credit repair strategies? BestCards recently spoke with both TD Bank and financial educator The Budgetnista to find out.
The Budgetnista and TD Bank’s Paramita Pal Talk Credit Card Rewards, Consumer Spending, and More
TD Bank’s recent Consumer Spending Index (CSI) survey, which annually surveys about 1,000 consumers on their spending and credit habits, found that 28% of those respondents who said they are spending more on credit cards during the pandemic were doing so because they want to build (or rebuild) their credit score.
The recent findings were followed by the launch of the bank’s latest credit card offering, the TD Bank Double Up Card, which earns 2% back on all purchases when funneling the rewards into a TD Bank deposit account.
BestCards recently had the chance to question the Head of U.S. Bankcard at TD Bank, Paramita Pal, and personal finance guru Tiffany Aliche, also known as The Budgetnista, about credit repair, credit card rewards, the latest CSI findings, and what they mean for consumers.
Repairing Credit During a Pandemic
Building credit and credit repair are challenging at the best of times and require planning, persistence, and patience. As the Budgetnista notes, the basics of credit repair include:
- Make on-time payments. The best way to do that is to automate your bills. This makes up 35% of your credit score.
- Keep your utilization as low as possible. That means keep your balance on your credit card below 30% of your limit. This makes up 30% of your credit score.
- If possible, pay off your card in full each month–it will help significantly boost your score.
But what happens to credit repair strategies during a pandemic? The COVID-19 pandemic has caused financial hardships for millions of American households due to sharp rises in unemployment. While many of the negative impacts of the virus on daily life have begun to subside, American families still struggle with lost wages, tight budgets, and other financial concerns.
Have Some Grace
According to Aliche, some leeway is essential in troubling financial times. “Normally, my view is that aggressively paying down debt, as well as saving and investing are the priority, she states. “However, during really traumatizing financial times, I encourage people to give themselves some grace. Your emergency savings are your first line of defense, and you should have enough saved to cover you for at least three months or more. If you don’t, that’s what your money should be going towards. Once your emergency fund is set up, then you can look into paying down debt again.”
This policy of grace, however, doesn’t conflict with her general belief that paying down debt and keeping credit utilization low is vital to repairing a damaged credit score: “So nothing has really changed, “she says. “it’s the same advice. I know it is not always feasible, but, if possible, that’s what you should work on. ”
A Third of Americans Spending More on Credit Cards Due to Coronavirus Pandemic
As noted, the TD Bank study found that nearly a third of respondents reported spending more on their credit cards than before the coronavirus pandemic. According to the Budgetnista, spending too much on credit cards falls into two distinct categories.
The first category of over-spending on credit cards is the “spend too much” problem. According to Aliche, “you know you have a ‘spend too much’ problem if most of your expenses are non-bills like eating out, streaming platforms, etc. Those (purchases) aren’t necessary household items.”
The other type of credit card over-reliance is what the Budgetnista refers to as the “don’t make enough issue.” According to Aliche, those in this category place most of their credit card charges are going towards bills, like rent, electricity, or other recurring expenses.
Credit Card Rewards Shifting Due to COVID-19
Shifting how you use your credit cards is one way to tackle financial concerns during a pandemic. Many credit card issuers have altered their rewards programs during the COVID-19 pandemic to better align with the spending needs of their customers, with notable examples being Amex, Capital One, and Chase.
TD Bank is one of the latest card issuers to change their approach to credit card rewards, with their latest offering, the TD Bank Double Up Card. The card offers unlimited 2% cash back on all eligible purchases, placing it in direct competition with other industry-leading cash back cards, including the Citi® Double Cash Card – 18 month BT offer.
TD Bank Responds to CSI Findings
The launch of the Double Up Card was no accident, according to TD Bank’s Paramita Pal, and represents the shift from travel rewards credit cards to more everyday value credit cards:
“We’ve found that reward programs are top of mind for consumers when weighing the benefits of a credit card. According to TD Bank’s annual Consumer Spending Index survey, nearly one in five Americans (17%) applied for a new credit card during the pandemic, and of that group, nearly 40% did so because they wanted a different rewards program as their spending habits had changed.
“Interestingly, we found that 62% of millennials with a rewards card said they wanted to change their travel rewards program, a third of whom said they needed the extra money in the form of cash back instead.
While many are excited about the potential for travel plans, our research indicates that many consumers are looking for cash back rewards that let them spend how they want to—whether that’s on travel, dining, or bills. We are constantly evaluating our rewards programs and offerings, to make sure they best suit the needs and priorities of our consumers.”
TD Bank Seeks to Continue Their New Rewards Structure Approach
According to Pal, the cash back rewards model of the Double Up is something the bank looks to capitalize on moving forward. “We were so excited to bring TD Double Up to market earlier this year, and in fact also re-launched our Business Solutions card with the same cash back value proposition,” she says.
“The flat 2% rewards program (1% when you spend, 1% when you redeem into an eligible TD deposit account) saves customers the headache of juggling multiple cards, keeping track of which credit card to use for each purchase and worrying if they are maximizing their cash back rewards. We’re always listening to our customers and work to tailor our rewards programs to fit their everyday spending needs.”
About Tiffany Aliche
Tiffany Aliche, founder of “The Budgetnista”, is an award-winning teacher of financial education, and America’s favorite personal financial educator. She is the author of the New York Times Bestseller Get Good with Money, as well as The One Week Budget, and the Live Richer Challenge series. She has also authored a children’s book, Happy Birthday Mali More.
About TD Bank
TD Bank, America’s Most Convenient Bank, is one of the 10 largest banks in the U.S., providing more than 9.5 million customers with a full range of retail, small business and commercial banking products and services at more than 1,220 convenient locations across the U.S.
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