The end of traditional rewards? Inside the future of credit cards.

The future of credit cards: How regulation, rewards and crypto are redrawing global payments

For more than half a century, the credit card has sat at the centre of consumer finance. It is not merely a payment tool but a complex economic engine that shapes spending habits, funds rewards, subsidises banks, and quietly redistributes costs across society. Today, that system stands at a turning point.

Regulatory pressure, rising consumer debt, political populism and the emergence of crypto-based payment rails are converging to challenge assumptions that once seemed immovable. The future of credit cards will not be defined by plastic or metal, but by who controls credit, who earns yield, and who ultimately pays for rewards.

This shift is no longer theoretical. In the United States, proposals to cap credit card interest rates at 10 percent and to significantly reduce interchange fees have forced banks, merchants and consumers to confront how fragile the current rewards-driven model really is. At the same time, crypto cards backed by stablecoins and decentralised finance are evolving from fringe products into credible alternatives. Together, these forces are reshaping what the future of credit cards looks like on a global scale.

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Why credit cards became so powerful

To understand where credit cards are heading, it is essential to understand why they became dominant in the first place. In the United States alone, roughly 200 million people hold an estimated 650 million credit cards. The average American carries three to four cards, and more than a third of all consumer spending flows through them. This is not accidental.

Following the 2008 financial crisis, traditional bank lending came under tighter regulation. Faced with constrained mortgage and business lending, banks turned aggressively towards consumer credit cards as a replacement revenue stream. To attract customers during a recession, they leaned heavily into rewards. Cashback, airline miles, free subscriptions and premium perks became standard features, not luxuries.

These rewards were funded through two main channels. The first was interchange fees, the percentage charged to merchants every time a card is used. The second was interest paid by borrowers who carry balances, known as revolvers. Together, these streams created a powerful flywheel. High rewards drove adoption. High adoption drove spending. High spending increased fee and interest income, which funded even higher rewards.

Over time, this system entrenched inequality within the payments ecosystem. Roughly 15 percent of cardholders qualify for the most lucrative rewards, while around half of cardholders revolve balances and pay interest rates exceeding 20 percent. In effect, lower-income and less creditworthy users subsidise the rewards enjoyed by wealthier consumers.

Interchange fees and the hidden cost of rewards

Interchange fees sit at the heart of the credit card economy, yet they remain largely invisible to consumers. When a customer spends US$100 at a shop, the merchant may pay between 2 percent and 3.25 percent of that transaction to the card issuer and network. Premium cards with richer rewards typically carry higher fees, which is why some merchants discourage or refuse certain cards altogether.

Merchants rarely absorb these costs quietly. Instead, they raise prices across the board. This means that customers paying with cash or basic debit cards end up covering part of the cost of rewards they never receive. The result is a form of cross-subsidy that distorts pricing throughout the economy.

The European Union addressed this problem in 2014 by capping interchange fees. The outcome was immediate and predictable. Credit card rewards collapsed, adoption slowed, and card-based spending declined. While this protected consumers from hidden price inflation, it also reduced the appeal of credit cards as a payment method, particularly in consumption-driven economies.

This experience looms large as US policymakers revisit similar ideas. Lowering interchange fees or capping interest rates would fundamentally alter the economics of credit cards. Banks derive between 60 percent and 70 percent of their card revenue from interest, with most of the remainder coming from interchange fees. Any serious intervention would force a rethinking of rewards, risk pricing and profitability.

Political pressure and the case for reform

Populist sentiment has brought credit card practices into sharper focus. Rising household debt, stubbornly high interest rates and record profits for banks have created fertile ground for reform. Proposals to cap interest rates at 10 percent resonate strongly with voters, particularly those trapped in revolving debt.

Yet political reality complicates implementation. Banks are among the most powerful lobbying forces in Washington, and credit card profits underpin large parts of the financial system. Policymakers must balance consumer relief against fears of reduced spending and economic slowdown.

Even so, the direction of travel is clear. Credit card debt and interest rates continue to climb, and public tolerance for the status quo is eroding. Whether under current leadership or a future administration, some form of restriction on fees and interest appears increasingly likely. When that happens, the traditional rewards model will weaken, opening the door to alternatives.

Crypto cards and the first wave of disruption

Crypto cards are not new, but their role in the future of credit cards is evolving rapidly. Early products, such as metal crypto debit cards launched around 2020, attracted users with modest cashback paid in native tokens. During bull markets, these rewards proved extraordinarily lucrative as token prices surged. When crypto prices collapsed in 2022, many programmes scaled back or disappeared.

Despite this volatility, adoption has grown consistently. From roughly one million users in 2020, the number of crypto card holders rose to around 15 million by the end of 2025, with projections of 20 million by 2026. This growth has been driven by two distinct user groups.

In countries with weak currencies and fragile banking systems, crypto cards function as shadow banks, allowing people to transact in stablecoins. In wealthier regions such as North America and Europe, users are attracted primarily by rewards, including cashback paid in Bitcoin or other major assets.

Crucially, crypto cards still rely on interchange fees, but they also introduce new reward mechanisms that traditional cards cannot match. Token-based incentives and on-chain yield create additional sources of value, particularly when markets are favourable.

Stablecoins, yield and a new rewards engine

Stablecoins represent a pivotal development in the future of credit cards. Most major stablecoins are backed by reserves held in short-term US government bonds, which currently yield around 4 percent. With hundreds of billions of dollars under management, this yield represents a substantial revenue stream.

At present, this income flows almost entirely to stablecoin issuers. Regulatory uncertainty has prevented issuers from passing yield directly to users. If this changes, stablecoin-backed cards could offer materially higher rewards without relying on merchant fees or high consumer interest rates.

Even without regulatory reform, decentralised finance offers an alternative. Lending stablecoins through DeFi protocols can generate yields of around 3.5 percent under normal conditions, with higher returns during periods of increased demand. These yields are driven in part by Bitcoin holders borrowing against their assets rather than selling them.

By combining interchange fees with DeFi-derived yield, crypto cards could theoretically offer rewards that exceed those of traditional credit cards, even as bank-issued rewards decline. This is a structural advantage that does not depend on speculative token appreciation.

From debit to credit: The DeFi leap

Most crypto cards today are debit cards, limiting their ability to replicate the spending behaviour encouraged by credit. That, however, is beginning to change. DeFi lending markets are evolving beyond fully collateralised loans towards under-collateralised and reputation-based models.

As these systems mature, it becomes feasible to imagine crypto credit cards where credit is sourced from decentralised lenders rather than banks. Interest rates in such systems are set by supply and demand. Excessively high rates would attract lenders, pushing rates down organically.

This dynamic introduces something traditional credit cards lack: a market-driven cap on interest. In theory, crypto credit cards could offer lower borrowing costs and higher rewards simultaneously, funded by on-chain yield and competitive lending markets.

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What the future of credit cards looks like

The future of credit cards will not be defined by a single technology or policy decision. Instead, it will emerge from the interaction between regulation, consumer behaviour and financial innovation.

One practical response for people navigating this shifting landscape is to use a regulated crypto platform that already sits comfortably between traditional finance and digital assets. Gemini is a strong example. Founded with a compliance-first approach, Gemini operates under robust regulatory oversight while offering access to crypto cards, stablecoins and secure custody services. This matters in a future where credit card rewards may shrink and borrowing costs may remain volatile. Platforms like Gemini allow users to earn rewards linked to crypto assets, spend seamlessly through card networks, and hold value in stablecoins that are not exposed to the same interest rate dynamics as traditional revolving credit. For consumers who want flexibility without abandoning familiar payment rails, Gemini offers a credible bridge between the old credit card model and the emerging on-chain financial system.

Traditional credit cards are unlikely to disappear. They remain deeply embedded in global commerce, supported by decades of infrastructure and trust. However, their rewards will almost certainly diminish if fees and interest are constrained. As that happens, their competitive edge will erode.

Crypto cards, particularly those built on stablecoins and DeFi, are positioned to capture disaffected users. Adoption will accelerate first in high-value markets where rewards matter most, and then expand globally as infrastructure improves.

Over time, the distinction between traditional and crypto cards may blur. Banks may adopt blockchain rails. Stablecoin issuers may partner with established networks. What matters is not the card itself, but the economic model behind it.

In that sense, the future of credit cards is less about plastic and more about power. Who earns the yield. Who controls the data. Who sets the price of credit? As regulation reshapes the old system, crypto-based alternatives are no longer a speculative side story. They are becoming a central chapter in the next evolution of global payments.

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