Inflation drives up credit card use; California embraces cryptocurrency

Struggling to pay their bills, more Americans are turning to credit cards and loans

Inflation in the United States is more than three times higher than it was last year, which is straining Americans’ finances. Without stimulus checks and an interruption in monthly Child Tax Credit payments, financially challenged Americans are using their credit cards more frequently than they were a year ago. But they continue to hold back on dipping into savings and retirement accounts compared to last year. A year ago, fewer struggling Americans were paying for their daily expenses with a credit card. [USA Today]

Inflation leads to a significant increase in the use of credit cards.


Americans have reduced their credit card debt since the pandemic, but inflation could reverse the trend

At national scale, credit card balances have generally totaled around $800 billion over the past five years, according to the New York Fed. From the first quarter of 2020 to the first quarter of 2021, credit card balances fell by $123 billion nationally, or nearly 14%, the largest single-year decline since 2001. Newly delinquent credit card accounts began to decline in the second quarter. of 2020, when the pandemic was in full swing. This downward slope has continued ever since. In the last quarter of 2021, it stood at 4.1%, the lowest in at least 18 years, according to the New York Fed. Additionally, the share of credit card accounts written off — when a bank writes off badly overdue debt as uncollectible — fell below 2% for the first time since at least 1985, according to data from the St. -Louis. [Nerd Wallet]

California Set to Embrace Cryptocurrency and Regulate It

California, which has an economy larger than all but four countries and where much of the world’s tech innovation is born, on Wednesday became the first state to officially begin examining how to broadly accommodate cryptocurrency. and related innovations. Following a path blazed by President Joe Biden in March, Governor Gavin Newsom signed an executive order for state agencies to act in tandem with the federal government to craft regulations on digital currencies. It also calls on officials to explore the integration of broader blockchain computer coding into government operations. [Associated Press]

Fed issues biggest rate hike in 22 years

The Federal Reserve announced on Wednesday that it raise interest rates by half a percentage point to tame the worst inflation America has seen in 40 years. This is the first time in 22 years that the central bank has raised its rates so much. The decision was unanimous, with the agreement of the 12 members of the Federal Open Market Committee responsible for defining policies. In March, the Fed raised its benchmark borrowing rate for the first time since late 2018, raising it by a quarter of a percentage point. [CNN]

Starbucks customers have over $1 billion in gift cards

Starbucks just revealed that a whopping $1 billion is sitting in unused Starbucks gift cards. Acting CEO Howard Schultz told investors on a second-quarter earnings call that the cards are used by more than 120 million people. Customers purchased 46 million cards in 2020, totaling $12.6 billion in gift cards for the year. Starbucks Cards alone are bigger than the entire gift card industry, Schultz said. Gift cards can be a boon for retailers because recipients often don’t use the full amount. This essentially offers free money to the card issuer, as nearly 40% of 18-29 year olds lose their gift cards before they can spend them, and about 25% of 30-64 year olds do the same. [Business Insider]

EU hits Apple with antitrust complaint over mobile payments

European regulators on Monday accused Apple of abusing its dominant position to restrict competitors’ ability to access the digital wallet technology behind Apple Pay, a move that potentially exposes it to significant fines. In a “statement of objections”, which represents the preliminary conclusion of an investigation, the European Commission said that Apple had tried to restrict the “tap and go” technology which plays a major role in its success in mobile wallets, a growing segment of the economy. . Margrethe Vestager, the European antitrust chief, said Apple may have blocked third parties from accessing key technology needed to develop mobile wallet alternatives for its devices. [The Washington Post]

US ‘Open Banking’ rule bogged down by privacy concerns

A long-awaited “open banking” rule in the United States that could dramatically boost competition in consumer credit and increase Americans’ access to financial services is stalled by problems, according to five people with knowledge of the matter. confidentiality. The Consumer Financial Protection Bureau’s rule would allow consumers to easily share their financial data with third parties. This would remove a major barrier to switching service providers who might offer lower fees. Proponents say open banking will make it easier for non-banks like tech companies to compete with traditional financial institutions, reducing costs and improving access to financial services for millions of Americans. [Reuters]

29% of consumers usually renew their credit card balances

Paycheck-to-paycheck consumers are three times more likely to rollover credit card debt and have higher monthly balances, according to a new study. Consumers who never pay their credit balances in full also tend to hold more credit cards than average, according to the research, which also finds that 29% of credit card holders ‘always’ or ‘usually’ renew. » their balances. Paycheck-to-paycheck consumers who pay their bills without problems report an average spend of $3,100 and a limit of $6,500. Consumers who don’t live paycheck to paycheck report an average spend of $2,100 and a limit of $9,000. [PYMNTS]

Buy-it-now, pay-later services are retailers’ next big hope

Buy now, pay later services, which offer buyers a financing solution and an alternative to credit cards, have been adopted by more than 100 million people worldwide in less than a decade. Most BNPL companies operate two consumer products: an interest-free offer, which splits a purchase, usually a smaller-scale transaction, into three or four equal payments; and interest-based installment loans, which spread the cost of larger purchases, such as furniture. Market leaders Affirm, Afterpay (which Block, formerly Square, acquired for $29 billion), and Klarna are now ubiquitous on e-commerce sites. Meanwhile, major digital wallets PayPal and Apple Pay are pursuing their own BNPL products. Shares of Affirm fell 10% in July last year when Bloomberg announced Apple’s plans to launch a paid product with Goldman Sachs. [Fast Company]

Mastercard strengthens its defenses against first-party fraud

Mastercard is building more capabilities around fraud detection as part of a strategy to win more business from companies that might otherwise turn to fintechs for the same services. In addition to competing with fintechs, Mastercard is also engaged in a technology arms race with Visa, which is also improving its fraud detection capabilities. For Visa and Mastercard, identity management for fast-moving digital commerce transactions is also a way to demonstrate utility beyond payment processing. [American Banker]

Senators Grill Visa, Mastercard Execs on swipe fees

On Wednesday, senators scrutinized Visa and Mastercard for raising merchant swipe fees, costs they say will be passed on to consumers amid runaway inflation. Senate Judiciary Committee Chairman Dick Durbin (D-Ill.), a longtime critic of the credit card giants, has called for new rules to inject competition into the credit card industry and prevent “unreasonable” fees. On April 22, Visa and Mastercard changed their interchange fees, which are added to every credit card transaction to compensate issuing banks and pay for consumer rewards and anti-fraud measures. Visa reported a fee reduction for most small businesses while Mastercard said it lowered fees on transactions under $5, but the changes still represent a $475 million annual fee increase for merchants. [The Hill] dramatically cuts rewards for its popular debit cards announced on Sunday that its Visa debit cards will soon be less attractive. Starting June 1, 2022, the debit card suite will earn significantly lower rewards, and rewards for Ruby Steel and Royal Indigo/Jade Green cards will now have a monthly rewards cap. Starting June 1, Ruby Steel and Royal Indigo/Jade Green cards will have monthly reward caps of $25 and $50 respectively. Limits will reset on the first of each calendar month. Card rewards will also be significantly reduced. [ZD Net]

Capital One continues with credit card blitz marketing

Capital One Financial spent more on marketing at the start of the year than analysts expected, with executives saying they looked at opportunities to win new credit card customers. In its first-quarter earnings release, the company announced marketing expenses of $918 million. While that figure was down 8% from nearly $1 billion spent in the previous quarter, the level of spending reflects Capital One’s plans to continue its marketing ramp-up since year-end. last. [American Banker]

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