Corrected, April 17, 2024: A earlier version of this article included an incorrect timeframe for Federal Reserve of Philadelphia data on credit card delinquency rates. In Q4 of 2023, they were the worst since 2012, when the Philadelphia Fed began tracking the numbers.
Credit Card Delinquency Rates Were Worst Since 2012 When Fed Began Tracking The Data
U.S. credit card delinquency rates in the fourth quarter of 2023 were the highest since 2012, according to a Federal Reserve Bank of Philadelphia report. Almost 3.5% of card balances were at least 30 days past due as of the end of December, the Philadelphia Fed said. That’s the highest figure in the data series, which goes back to 2012, and up by about 30 basis points from the previous quarter. The share of debts that are 60 and 90 days late also climbed. But, underscoring the dichotomy among consumers, about one-third of card holders pay their balance in full every month. [Bloomberg]
Department Stores Face Another Squeeze. This Time, with Store Credit Card Revenue
Department stores and other retailers will feel the impact of a new federal rule, which caps credit card late fees at $8. Analysts say department stores will get squeezed more by the rule, since their revenue is already under pressure. Store credit cards allow retailers to drive repeat purchases and make a cut of cash. Even before a recent CFPB ruling, the revenue segment was under pressure. [CNBC]
Using Your Phone to Pay Is Convenient, But It Can Also Mean You Spend More
These days, you don’t even have to take your credit card out of your wallet in order to buy something. If you are shopping online, you can store your credit card numbers on your computer and just hit “click to pay.” In a store, call up Apple Pay or Google Pay on your smartphone and tap it against the payment terminal. There’s a term now for this type of purchase: frictionless payments. And it might make spending money a little too easy for some people. In a recent paper based on data from a Chinese bank, researchers found that customers charged 9.4% more on average to their credit cards, through both online and in-person transactions, after they adopted a mobile payment method than they had before. [NPR]
Congress Could Overturn a New Rule Limiting Credit Card Late Fees. Good.
On the surface, last month’s decision by the CFPB to cap credit card late fees at no more than $8 per month sounds great. No one likes getting hit with late fees for missing minimum payments, which previously averaged about $32 per month but vary from credit card to credit card. Some Americans might end up not liking it either, particularly if the result is higher interest rates on credit card purchases or stricter limits on who gets access to credit in the first place. There’s the possibility that Congress could get involved. Sen. Tim Scott introduced a bill on Monday to overturn the rule using the Congressional Review Act, which allows Congress to have the final say on executive agency actions. [Reason]
House Republicans Demand NYC Halt Debit Card Program for Illegal Immigrants
A contingent of House Republicans demanded in a Wednesday letter that New York City immediately halt its $53 million debit-card program for illegal immigrants, arguing that it incentivizes migrants to come to the city after illegally crossing the border. In the three-page letter, Representative Lance Gooden (R., Texas) and seven of his GOP colleagues asked Mayor Eric Adams to provide answers about the Immediate Response Card program, including whether it is using federal funds. [National Review]
With Inflation Back Up, the Long-Predicted Storm Clouds in the Economy May Actually Be Forming
Progress on inflation is moving in the wrong direction. The latest Consumer Price Index showed that annual inflation ticked up to 3.5% in March from 3.2% in February. That marked the largest annual gain in half a year. Even though the current inflation rate is better than last March’s 4.9% rate, it signifies the highly anticipated rate cuts investors were banking on may not come this year. Now, instead, they may need to brace for another rate hike as interest rates stand at a 23-year high. This could mean that the many influential leaders and economists who long predicted storm clouds and a hurricane hitting the US economy may finally be right. [CNN]
AmEx Class Action Claims Company Shares Credit Card Applicant Data with Facebook
American Express Company shares credit card applicants’ data with Facebook without their knowledge or consent, according to a new AmEx class action lawsuit. Plaintiff Philip Camacho says he applied for an American Express credit card from the AmEx website last year and provided multiple pieces of sensitive information such as his Social Security number, total annual income and income source. Camacho alleges American Express later used a Facebook tracking pixel to send his sensitive data to Meta without his knowledge, consent or authorization. The tracking pixel is a piece of code that advertisers can install on websites and it transmits records of website users’ activities to Facebook. [Top Class Actions]
56% of Buy Now, Pay Later Users Have Experienced Issues Like Overspending and Missing Payments
With money being tight, buy now, pay later (BNPL) has quickly become one of America’s go-to payment methods. Over a third of U.S. adults (39%) have used at least one of these services at checkout, according to a new Bankrate survey. Requirements are quite flexible; most lenders only ask for a few contact details and payment information for approval. But the easy access to credit and bite-sized payment structure doesn’t come without faults. Most BNPL users (56%) say they’ve experienced at least one problem, like overspending, missing payments and regretting purchases, while using the service. [Bankrate]
Mastercard Reorg Shows Urgent Industry Focus on AI
AI’s impact has been felt at major and minor levels for almost every company in the payments industry. At Visa, it sparked what was arguably one of the company’s most high-profile new product launches with Visa Protect, which uses AI to reduce fraud across account-to-account and card-not-present payments, as well as transactions both on and off Visa’s network. At Amex, CEO Stephen Squeri used his March 15 shareholder letter to introduce a new Generative AI Council that includes technology, data science, risk management, legal and strategy teams to assess and approve the deployment of generative AI (GenAI) use cases across the company. At Mastercard, the importance of data, which these days is synonymous with AI, played a big role in an executive reshuffling announced April 9. [PYMNTS]
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