Credit Card Issuers Aren’t Done Raising Rates, Despite Fed Pause
Americans with credit card debt won’t see relief even after the Federal Reserve decided against hiking its benchmark rate last week. Their situation may even get a bit worse next year, at least temporarily. So why are credit card interest rates not letting up even though Fed hikes may be done? For one, as interest rates have risen over the past two years, some cardholders have been having a harder time paying off their debts. The delinquency rate on credit cards reached 2.98% in the third quarter, up from 2.77% the previous quarter, according to the Fed. It was also the highest level since 2012, when it was 2.92%. And with the federal pause on student loans having ended this year, more folks are struggling to keep up with their debts. According to the Department of Education, nearly 9 million borrowers missed their first student loan payment. [Yahoo Finance]
Mastercard Launches Shopping Muse, an AI-Powered Shopping Assistant
Mastercard is launching a new generative AI shopping tool called “Shopping Muse” that is designed to help users get personalized product recommendations. The tool is powered by Dynamic Yield, a personalization company that was acquired by Mastercard in April 2022. Mastercard says the idea behind Shopping Muse is to “revolutionize how customers search for and discover products in a retailer’s digital catalogue.” In order to provide personalized recommendations, Shopping Muse looks at the context of the user’s shopping experience, the direct question(s) it is being asked and the content of the conversation. The algorithms use data from the retailer’s product catalog, along with the shopper’s on-site behavior, such as clicking certain products and adding products to carts. The algorithms also look at real-time and known preferences the consumer demonstrates. [Tech Crunch]
Maxed Out: Inside America’s Credit Card Debt Crisis and Where We Go From Here
Credit card debt is just one type of debt we face in our lifetimes, along with mortgages, car loans, student loans and medical debt. But the credit card is uniquely powerful. It’s comparatively easy to obtain. It’s aggressively marketed. It also heavily influences your credit score, the financial reputation marker that determines if and how you fund future milestone purchases. The way we use a credit card reflects the learned behaviors and financial education we’ve internalized throughout our lives. And using a credit card has never been easier. With digital wallets, we can spend money with a single click, tap or scan. E-commerce has accelerated new financing iterations like “buy now, pay later,” giving us yet another way to trick our brains by separating the act of buying from the act of paying. [CNet]
Apple Pulls Plug on Goldman Credit Card Partnership
Apple is pulling the plug on its credit-card partnership with Goldman Sachs, the final nail in the coffin of the Wall Street bank’s bid to expand into consumer lending. The tech giant recently sent a proposal to Goldman to exit from the contract in the next roughly 12 to 15 months, according to people briefed on the matter. The exit would cover their entire consumer partnership, including the credit card the companies launched in 2019 and the savings account rolled out this year. [The Wall Street Journal]
Affirm Offers Buy Now, Pay Later Loans at Walmart Self-Checkouts
Affirm is offering its “buy now, pay later” loans for the first time at self-checkout kiosks at more than 4,500 Walmart U.S. stores, the lender said on Tuesday, sending its shares up as much as 16.1%. Buyers of at least $144 of products at Walmart, except groceries, can divide payments over three to 24 months through Affirm, a spokesperson said. Financing is limited to $4,000. [Reuters]
American Express Introduces Dynamic Welcome Offers
Next time you’re tempted by an American Express welcome bonus, give the offer a second look before applying. Amex is testing out variable offers, which might mean that the bonus points you qualify for is different from the big, bold number you see on the top of the credit card page. Now, though, American Express is adding language to some card offers that states your welcome offer may be “up to” the advertised allotment of points, suggesting that some customers may only receive a subset of the potential maximum. Other times, potential customers may receive offers to earn “more than” the designated amount of rewards, suggesting that some lucky targeted applicants may actually get more than the number advertised. [Forbes]
Debt Dominates the 2023 Credit Cards Year in Review
For a second straight year, the biggest theme in the credit card industry in 2023 was debt. Specifically, more people are carrying more of it for longer periods of time — and at record-high interest rates. Paying down debt is Americans’ top financial resolution for 2024, according to a recent Bankrate survey. Our most recent credit card debt survey conducted over the summer revealed that 47% of credit cardholders carry balances from month to month, up from 39% in 2021. And 60% of these individuals with credit card debt have been in debt for at least a year, up from 50% in 2021. Americans’ total credit card balances add up to a record $1.08 trillion, according to the New York Fed. That’s a whopping 40% increase since the first quarter of 2021. [Bankrate]
U.S. Bank Fined $36 Million for Freezing Unemployment Debit Cards During Covid-19 Pandemic
The Consumer Financial Protection Bureau announced it has fined U.S. Bank nearly $21 million for cutting off access to unemployment insurance benefits during the height of the Covid-19 pandemic. The Office of the Comptroller of the Currency imposed an additional $15 million penalty on the bank over the same practices. The fifth-largest commercial bank in the country, U.S. Bank administered prepaid debit cards to distribute unemployment insurance benefits through its ReliaCard program. But starting in the summer of 2020, when unemployment rose close to 15%, the bank froze tens of thousands of accounts due to suspected fraud. It then failed to provide a reliable method for consumers with frozen cards to regain access to their benefit money, the CFPB said. [CNBC]
Lawsuit Claims Apple, Visa, Mastercard Made Anticompetitive Agreements
Apple, Visa and Mastercard conspired to block competitors’ mobile-based payment systems from competing with point-of-sale payment networks, an antitrust class action lawsuit alleges. Plaintiff Mirage Wine + Spirits, doing business as Mirage Wine & Spirits, is a merchant that accepts Apple Pay as a payment method at its point of sale. Due to Apple’s allegedly anticompetitive agreement with Visa and Mastercard, Mirage allegedly paid higher fees for point-of-sale transactions at prices that were artificially inflated, according to the Apple lawsuit. [Top Class Actions]
New York Prohibits Credit Card Surcharges, But Allows Debit Card Fees
In New York State, businesses are not allowed to add a surcharge to purchases made with credit cards, as confirmed by the New York State Division of Consumer Protection. This rule prohibits businesses from advertising one price and then adding an extra fee at the point of sale for credit card payments. However, the state does permit businesses to offer discounts for cash payments, a practice often seen at various retail locations. Although outright surcharges are banned, businesses can legally charge a higher price for credit card purchases, provided they clearly list this higher price. Any form of “flat fee notice” or “percentage fee notice” for using a credit card, however, violates New York law. [Finger Lakes 1]
Illinois Family Accidentally Bought $10K in Disney+ Gift Cards Instead of Disney Vacation
A family who has been planning a vacation since the start of the coronavirus pandemic recently discovered they accidentally purchased $10,000 worth of Disney+ streaming gift cards for their future Disney experience instead of gifts cards to the popular parks. With 16 family members on the list, her parents purchased a series of gift cards to help offset the costs of the trip and to help secure reservations. In total, they purchased roughly $10,000 in gift cards online. But when they went to book the trip, it became clear something was off. The gift cards weren’t working for their purchases. That’s when the family realized the gift cards were not for Disney parks, but for Disney+ streaming services. Enough for what Coston said is 70 years of streaming. [NBC Chicago]
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