Why Are Americans Cutting Back on Credit Card Debt?
U.S. households piled up credit card debt much more slowly in March than in previous months, resulting in the smallest increase in revolving debt since 2021. Banks have gotten pickier about whom they lend to over the past few years, making it harder to get a credit card. Lenders are growing more worried they won’t be paid back as high interest rates from the Federal Reserve’s efforts to curb inflation hit household budgets and bite into the job market. [Investopedia]
CFPB Official Urges Consumers to Consider Small Credit Card Issuers
Consumers should proceed with caution when selecting their next credit card, according to a recent blog post from the CFPB. In the post, Julie Margetta Morgan, the CFPB’s associate director of research, monitoring and regulations, reminds readers that the top 10 credit card companies alone manage 83% of outstanding credit card debt and that many of the biggest card issuers offer cards that come with the worst terms, the highest interest rates and the steepest late fees. “By comparison,” she wrote, “smaller credit card companies tended to offer far better deals on interest rates: across all credit tiers, small companies offered rates between eight and 10 percentage points lower than larger companies.” Although she urges U.S. consumers to at least consider looking into cards issued by “small banks and credit unions.” [PYMNTS]
Why Reward Credit Cards Might Not Be Rewarding for Everyone
The allure of chasing rewards reveals its true colors. It’s more than just the immediate hit to our wallets via fees or less generous reward offerings. The real cost seeps into our spending behavior, subtly nudging us to spend more with the promise of earning more, distorting our financial priorities. Ultimately, the quest for rewards needs a reality check: are we really winning, or are we just playing into the hands of those setting the rules? Those rewards are only really rewarding if you’re the type who zeroes out the card balance every month. Miss that mark, and any hopes of benefitting from those points get gobbled up by interest charges faster than you can say “cash back.” [The Motley Fool]
Klarna Joins the Race for Top-of-Wallet Status in the U.S. with Its New Card Offering
Klarna is the latest player in the US market to introduce a new card offering and open its waitlist to American consumers. Like its European version, the Klarna card enables both in-store and online payments, linking to users’ existing bank accounts. Unlike the ‘Pay in 30 days’ or ‘Pay in 3’ options, all purchases made with the card are consolidated into a single monthly statement, offering various payment terms, including zero-interest full payment, early payment, or paying overtime with interest. However, the failure to meet payment deadlines triggers penalties and poses a threat to users’ credit standing, a scenario reminiscent of missed payments reported by BNPL services to credit agencies. Continued missed payments may escalate to debt collection. [Tear Sheet]
Mastercard Joins U.S. Banking Giants to Develop Tokenized Payments
Mastercard is joining U.S. banking giants to develop distributed ledger technology for banking payments using tokenization. The companies will test a shared ledger technology called the Regulated Settlement Network. The project aims to increase the efficiency of cross-border payments and reduce the likelihood of errors and fraud. Ten banking giants are participating in testing the new technology: Citi, JPMorgan, Mastercard, Swift, TD Bank, U.S. Bank, USDF, Wells Fargo, Visa, and Zions Bancorp. [Crypto News]
‘Phantom Debt’ from ‘Buy Now, Pay Later’ Schemes is a $700 Billion Black Hole that Economists Aren’t Accounting For
A Wells Fargo analyst has also flagged a personal finance feature that is largely overlooked by the sector: people purchasing products—contributing to stronger sales for brands—but without paying the full balance at the time of sale. Instead, payment for these products is taken in installments over a longer period of time. The problem with this, for economists at least, is that the larger BNPL platforms often decline to share their customers’ purchasing patterns with some or all credit bureaus, concerned that their customers’ activity may ultimately bring down their credit score. BNPL lenders may also report some but not all of their data. For example, in the U.K., BNPL providers are required to share a customer’s credit and repayment history for products with a short repayment window or multiple smaller payments across various accounts. This black hole of information between BNPL lenders and credit agencies across the world is why Wells Fargo senior economist Tim Quinlan has coined the term “phantom debt.” [Fortune]
CFPB Report Highlights Consumer Frustrations with Credit Card Rewards Programs
The CFPB issued a new report finding consumers encounter numerous problems with credit card rewards programs. Consumers tell the CFPB that rewards are often devalued or denied even after program terms are met. Credit card companies focus marketing efforts on rewards, like cash back and travel, instead of on low interest rates and fees. Consumers who carry revolving balances often pay far more in interest and fees than they get back on rewards. Credit card companies often use rewards programs as a “bait and switch” by burying terms in vague language or fine print and changing the value of rewards after people sign up and earn them. New problems have been created by the growth of co-brand credit cards and rewards programs where consumers can transfer miles or points to merchants. [CFPB]
Wells Fargo Launches Signify Business Credit Card with 2% Cash Back
The Signify Business Cash Card by Wells Fargo, launched in May 2024, is a credit card aimed at small business owners and offering 2% cash back on purchases while charging no annual fee. It will be available in all Wells Fargo branches in mid-May for new and existing customers. But existing Wells Fargo customers can apply online immediately. You’ll have the opportunity to earn the following welcome bonus: $500 cash rewards bonus when you spend $5,000 in purchases in the first 3 months. [Fortune]
Global Mobile Banking Malware Surges 32% in 2023
Global mobile banking malware attacks increased by 32% in 2023, highlighting growing threats to digital financial assets, according to Kaspersky’s annual Financial Threats Report for 2023. Android users saw the largest increase in mobile banking Trojan attacks, a 32% surge compared to 2022. The report found that financial phishing attacks remained a significant threat, with e-shop brands serving as the top phishing lure. PayPal phishing was also on the rise. Additionally, cryptocurrency phishing saw a 16% year-on-year increase, with scammers frequently mimicking cryptocurrency exchanges or offering coins under the guise of major corporations like Apple. [Daily News Egypt]
Retail Shoppers Pay by Debit Card in Stores but by Credit Online
According to an October survey of more than 2,100 U.S. consumers, 44% of respondents had paid for their most recent retail purchase in stores via debit card, while 28% paid with a credit card. Conversely, 41% of consumers surveyed had paid for their most recent online retail purchase using a credit card, a greater share than said the same of any other payment method, while 36% used a debit card. [PYMNTS]
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