Coronavirus has shaken financial markets globally, leaving a vast number of cardholders concerned about its impact on their finances. Here you’ll find out how coronavirus is affecting the credit card world, and what you can do to protect your personal finances during these difficult times.
As coronavirus is spreading around the world, it leaves many financial implications in its wake. It’s greatly affecting the global economy, including stock markets, housing markets, supply chains, the travel industry, hotels, and many other industries.
The negative economic impact of the virus is already huge. The stock market recently had its worst week since the financial crisis of 2008.
It’s still nearly impossible to predict the economic fallout of the outbreak, but it is clear that one of its biggest implications concern the credit card industry.
Credit card issuers are nervous and their customers, perhaps, even more so.
However, there’s finally some hope for financial support for companies and individuals who may need it. The US Federal Reserve recently cut interest rates (source), making it cheaper to borrow money and purchase financial assets.
But this can’t be good for the economy in the long run. It may strengthen the economy for a while, but it may also lead to inflation. Banks certainly can’t be profitable with interest rates near zero, so you should expect more changes soon.
We’re yet to see how the financial rollercoaster of coronavirus ends. For now, let’s take a look at the most significant changes it has brought to the credit card world, and what you can do to protect your finances.
The best way to protect your personal finances in the midst of the coronavirus outbreak is to stay informed. Staying up-to-date with all the changes in the financial world will help you understand how to keep your financial assets safe and secure.
What Is Changing in the Credit Card World?
The credit card world is undergoing significant changes during the COVID-19 global outbreak. Take a look at how some of the major banks and credit card networks are responding to the emergency.
The US Federal Reserve Cut Interest Rates
As already mentioned, the US Federal Reserve reduced interest rates ahead of its next scheduled policy meeting. The COVID-19 risk to the US economy and financial markets is simply too big to sit idly, so the US central bank responded to the emergency with a sharp rate cut.
This was the first interest rates cut the US central bank has made between its scheduled policy meetings since the 2008 financial crisis.
The Bank of Canada followed suit, reducing its trend-setting interest rate in the hope that it will soften the COVID-19’s blow on the country’s economy.
Many now believe the US central bank will soon adopt negative interest rates. Others are certain it won’t make another cut, as this one is supposedly enough for the US economy to rebound and avoid another recession.
Whatever the case, the Federal Reserve certainly can’t combat the crisis on its own. Perhaps Congress could cut payroll taxes for a year to prevent a recession. The collaboration of the big guns is really the key here. We can only hope they all join forces.
Mortgage Rates in the US Hit an All-Time-Low
Following the US Federal Reserve’s interest rates cut, mortgage rates in the US sunk to an all-time low, after 30 years of being fixed.
The only time when the US mortgage rates hit their lowest point was back in November 2012, when the country was recuperating from the Great Recession. Now, the rates are even lower.
Mastercard® and VISA Cut Revenue Outlook on Coronavirus Impact
Mastercard has recently knocked off percentage points off its revenue forecast on the impact of coronavirus.
The revenue cut should lead to the credit card network’s revenue growth on a currency-neutral basis, with the exclusion of acquisitions.
VISA has followed suit, as its cardholders have considerably lowered their spending abroad, too, especially when it comes to purchases regarding travel.
Wells Fargo Unveiled Two New Bank Accounts
Wells Fargo unveiled two new offers for its customers, one with limited overdraft fees and the other without.
One of its two new bank accounts will be a checkless account without an overdraft option. The users of the account won’t face any overdraft or insufficient fund fees. They will only have to pay a monthly fee to use the account and access their funds.
Users will be able to access them with a debit card, but writing checks won’t be an option. They will, however, have access to ATMs, in-person banking, online banking, Zelle, and mobile alerts.
The other bank account will have limited overdraft fees. The users will be able to write checks, but they will need to pay an overdraft fee when applicable. This account comes with a higher monthly fee than a checkless account and includes all the mentioned services.
American Express Boosted Credit Card Sign-Ups Using Misleading Sales Tactics
Some credit card issuers resorted to turning panic into profit in the midst of the virus outbreak.
The salespeople at American Express used misleading sales tactics to increase their credit card sign-ups. They falsely represented the fees and card rewards to get small business owners to sign up for their services.
They even performed credit checks without permission, hurting credit scores of dozens of small business owners, since every inquiry makes a credit score drop by some points.
The AmEx sales staff even issued credit cards in cases where the users didn’t even ask for them.
This was all a very aggressive campaign to retain and get more customers after Costco ended its partnership with American Express.
Credit Card Benefits Are Changing
Credit card benefits started changing in 2018, with many credit card issuers removing some or nearly all of the benefits from their cards.
In 2018, Discover completely discontinued these huge perks from all of its cards:
- Extended product warranty
- Purchase protection
- Return guarantee
- Auto rental insurance
- Flight accident insurance
In 2019, Citi removed almost every perk from all of its rewards cards, including:
- Citi Price Rewind
- Return protection
- Trip cancellation and interruption protection
- Trip delay protection
- Baggage delay protection
- Lost baggage protection
- Worldwide travel accident insurance
- Car rental insurance
- Roadside Assistance dispatch service
- Travel and emergency assistance
- Medical evacuation
- Missed ticket event protection
But now, when the COVID-19 is negatively affecting the travel industry, some credit card issuers are offering better travel benefits. Here’s what they are and how you can take advantage of them.
Be extra careful if you plan on applying for a new credit card during this time of great financial changes. Thoroughly examine all your options, compare various credit card issuers before making any commitments, and make sure you carefully read the fine print before signing on the dotted line.
Some Credit Card Issuers Are Adjusting Their Travel Benefits
The virus outbreak is causing a huge number of people to modify or cancel their trips, making the travel industry one of those witnessing the biggest negative effects.
Some airlines are temporarily allowing their customers to change their destinations or travel dates for free, while others will do it for a fee. Some airlines simply don’t offer such benefits.
If you purchase a flight ticket with a credit card that offers travel insurance or other kinds of travel benefits, you may be able to make some last-minute trip modifications. You may even be able to cancel your trip and get a reimbursement.
It all depends on the credit card you have.
If you plan on traveling anytime soon, be sure to ask your credit card issuer directly about all the travel benefits (if any) they offer.
Which Credit Cards Offer Travel Protection?
If you have an upcoming business trip or vacation, you need to be ready for your flight to be potentially delayed or canceled. Many countries are closing their borders to prevent further spreading of the virus.
If you bought your ticket a while ago, you might be the one thinking about modifying or canceling your trip.
Whichever the case, it’s good to know which credit cards offer travel protection, and what that protection entails. Here are only some of the credit cards that provide a range of travel perks.
Chase Sapphire Reserve® Card
Some of the travel benefits this card offers include:
- Trip cancellation/ Trip interruption insurance
- Baggage delay insurance
- Trip delay reimbursement
- Lost luggage reimbursement
- Travel redemption points
- Travel and emergency assistance
- Point transfer to leading frequent travel programs
Chase Sapphire Preferred® Card
This credit card comes with many of the same travel benefits that the Chase Sapphire Reserve® card offers, but it provides them for a significantly lower annual fee.
It’s a much better option of the two if you are not a frequent traveler or simply don’t want (or can’t afford) to pay a high annual fee.
AAdvantage® Aviator® Red World Elite Mastercard®
This card provides travel rewards for cardholders who frequently fly with American Airlines. Apart from various airline-specific perks, it offers the following travel protection benefits:
- Trip cancellation and interruption coverage
- Baggage delay insurance
- 24/7 travel assistance services
- Auto rental collision damage waiver
- Travel accident insurance
American Express Platinum Card
Platinum Card from American Express offers these important travel protections:
- Trip cancellation and interruption insurance
- Trip delay insurance
- Extended warranty
- Purchase protection
- Return protection
American Express Hilton Honors Aspire Card
Hilton Honors Aspire Card from American Express comes with these travel protection perks:
- Travel accident insurance
- Baggage insurance plan
- Car rental loss and damage insurance
- Premium roadside assistance
- Premium global assist
- Concierge services
There are many more credit card issuers offering travel protections. These are only some of the best ones that come with excellent perks you can enjoy.
But have in mind that some perks, such as trip cancellation, may not apply if you’re only afraid to travel because of coronavirus. Unless you or your family member is ill, your credit card may not cover the trip cancellation.
That’s why it’s imperative that you contact your credit card issuer to find out exactly what its travel protection covers.
Carefully read the terms and conditions of your credit card issuer or any issuer you may be considering. You’ll find out everything about their travel protections and travel insurance coverage (if any), but be sure to ask them directly as well.
Will Your Credit Card Travel Insurance Cover Coronavirus?
As already mentioned, this depends on your credit card issuer. If they offer some kind of travel insurance, it may not necessarily cover coronavirus, unless you’re ill. You need to contact them and ask.
You can also contact the airline and any hotel where you booked a reservation to see if they would reimburse you for canceling your trip or perhaps allow you to make some last-minute modifications.
However, be prepared for the fact that it’s highly unlikely that you’ll get a reimbursement in regards to the COVID-19.
That’s simply the way insurance policies are. Credit card companies don’t go throwing reimbursements to people who only have concerns about the virus. Even comprehensive travel insurance plans don’t do that sort of thing.
No credit card will give you a reimbursement for concerns about an epidemic.
On the other hand, if you get sick before your trip (provided it doesn’t have anything to do with a pre-existing medical condition) and need to cancel it, some credit cards may reimburse you.
For instance, American Express offers insurance coverage for accidental injury or death, whether it has to do with the cardholder, their family member, or their traveling companion.
Another instance where you may get a reimbursement is if you become ill during your trip and need to cut it short. If your illness calls for a quarantine (like coronavirus does), your credit card issuer may cover your trip cancellation.
For instance, Chase Sapphire Reserve, Chase Sapphire Preferred® card, and American Express Platinum Card all provide cancellation insurance for doctor-ordered quarantine.
Have in mind that you may get a trip cancellation or interruption coverage only if your credit card has that kind of travel insurance, and if you used that card to pay for travel.
You can’t get a refund just because of the threat of an epidemic, but only if you get sick before or during your trip. If that happens and you’re eligible for trip cancellation insurance, make sure you immediately notify your credit card company. They’ll tell you how to submit your claim and in what timeframe.
What About Rebooking Your Trip?
If you can’t get a reimbursement for your canceled trip, you may want to consider rebooking. You may even do it without any penalties.
For instance, JetBlue is waiving change and cancellation fees for flights booked between February 27, 2020, and March 5, 2020, for travel through June 1, 2020. This means you can change or cancel your trip without any penalties if you’ve booked a flight with the airline between the specified dates.
You should feel free to contact your airline or hotel directly and ask about their rebooking policy and potential penalty fees. As you can see, some don’t have any penalty fees, and some may have even updated their policies to include the current COVID-19 situation.
It’s really a big grey area right now, so you never know what you can get until you ask. For example, if you are a long-time customer, almost anyone is highly likely to bend the rules a bit to provide you with excellent customer service.
If you paid for your trip with reward points that you have collected on your credit card, you’d have much higher chances of getting back the points than getting a refund in cash. So, if you’re planning a trip and have enough reward points that you can use for travel, consider paying for your trip that way to avoid potential financial losses.
Do Comprehensive Travel Insurance Policies Cover Coronavirus?
Comprehensive travel insurance policies usually come with better travel insurance perks than credit cards. However, just as credit cards, they too don’t cover trip cancellations due to mere concerns about an epidemic.
Nevertheless, you can get a travel insurance plan with a CFAR (Cancel for Any Reason) coverage.
With such an insurance plan, you may be able to cancel your trip and get a refund even over concerns about the virus.
It’s all in the name – “any reason.” But even those insurance plans come with specific requirements that you need to meet. If you meet them, you can get reimbursed for a certain percentage of the price of your trip.
If you plan on getting travel insurance with a CFAR, make sure you thoroughly read the fine print, because many insurance companies are excluding coronavirus from the coverage. That’s because this virus is no longer an unforeseen event, and because its widespread effect poses a high risk for their business.
This coronavirus is an unprecedented event that’s causing various economic changes across industries. It already has a massive effect on finances, and we’re yet to witness the state in which it will eventually leave the global economy.
But when it comes to your personal finances, you’re in control. So, stay safe, and don’t let your finances catch the virus either. Follow all the tips above and improve your financial health.