Average credit card interest rates have exceeded 20%
Rising interest rates have pushed annual percentage rates on credit cards to new heights. The average annual percentage rate on a new credit card is now over 20%, according to LendingTree’s tracker. This is the first time rates have exceeded 20% since the tracker launched in 2018. And rates are poised to rise even more across the board. Credit card balances hit $841 billion in the first three months of the year, according to a report from the Federal Reserve Bank of New York. During the same period, 229 million people opened new credit card accounts, an increase from the previous quarter. [CNBC]
Galloping inflation is putting significant pressure on our household budgets
Inflation forces 85% of Americans to adjust essential purchases
You don’t have to follow the news to know that inflation is raging. Inflation in May 2022 was up 8.6% compared to the last twelve months. A quarter of respondents indicated that they had little room for maneuver in their current budgets: 27% of respondents’ budgets are already at the limit and 26% are overspending. To make ends meet, about 40% of respondents who have a credit card now rely more on it. As for the balance, 26% of respondents have recently started carrying it on their credit card, in addition to the 38% who already carry a balance. Despite this new dependence, 64% of respondents are somewhat or very worried that the rise in interest rates will have an impact on their debt. [Forbes]
US Consumer Watchdog to review ‘excessive’ late payment fees on credit cards
The top US consumer watchdog on Wednesday unveiled a measure that would look into excessive credit card fees and require card issuers to disclose more income and spending data in a bid to root out abuse and boost competition. The advance notice of proposed rulemaking issued by the Consumer Financial Protection Bureau backs up a Reuters report that the agency is stepping up a broader crackdown on what it calls “junk fees,” a catch-all for overdrafts, credit card late payment fees, NSF check fees and other fees. The review, which is the first of a number of related restrictions on unwanted charges, would specifically assess whether credit card late fees are reasonable and proportionate. [Reuters]
A third of UK users who buy now, pay later say they can’t manage payments
Nearly a third of buyers using buy now, pay later credit say loan repayments have become “unmanageable” as the cost of living crisis pushes them into a spiral of debt, according to a new study. Consumers are spending more via the controversial form of credit, with shoppers using BNPL now repaying an average of 4.8 purchases, nearly double February’s 2.6 purchases. Barclays Bank and debt charity StepChange said it was “worrying” as 30% of Britons have used BNPL to buy goods, and of these almost a third (31%) said that the loan had put them in debt. [The Guardian]
US banks are finally seeing a recovery in credit card borrowing
Overall balances on credit cards and similar loans at U.S. banks rose 15%, as of May 25, from a year earlier, and are back near pre-pandemic levels, according to data from the Federal Reserve. Even better for banks, cardholders are now allowing more of those balances to roll over and incur interest charges instead of paying them off monthly. During the pandemic shutdowns, consumers have reduced their credit card spending and paid down their balances like never before, thanks to stimulus payments and cash from refinancing mortgages. The share of active card accounts with revolving balances has increased over the past two quarters to 52.6% after plunging to 51.3% during the pandemic. These balances generally prevailed at a level of around 60% for the seven years before Covid-19, after reaching 70% during the 2008 financial crisis. [Reuters]
23% of consumers have held crypto in the past year
Consumer interest in crypto has blossomed during the pandemic, with PYMNTS finding that “the percentage of consumers who held crypto at any given time of year increased to 23% in 2021 from 16% in 2020.” After the crypto bloodbath of the past few weeks, confidence is wavering. The reasons why consumers buy and hold crypto differ: more than half (55%) of consumers who have held crypto in the past year bought it as an investment. These are generally higher earners, as only 15% of consumers earning less than $50,000 have held crypto. [PYMNTS]
Colorado’s passage of surtaxes law makes Massachusetts and Connecticut the only states to ban surtaxes
Colorado’s new law, signed by Governor Polis on Thursday, caps surcharges at 2% of the transaction amount or the actual transaction cost to the merchant, mandates disclosure of the surcharge amount to consumers prior to the transaction, and prohibits debit card surcharges. . The bill aligns with precedent from the U.S. Supreme Court and court rulings in other states that have ruled that surtax prohibitions unconstitutionally restrict merchants’ First Amendment rights. Colorado’s passage of the law leaves only two states, Massachusetts and Connecticut, with additional bans. [Digital Transactions]
Citi waives overdraft and item return fees on retail bank accounts
Citi has removed overdrafts, overdraft protection transfers and returned item fees from Citi Retail Banking consumer deposit accounts. Citi said that made it the only U.S. bank in the top five, by assets, to waive fees for Citi Retail Banking consumer deposit accounts. The bank added that this change shows how it wants to increase financial inclusion and drive economic progress for the underserved. The bank will add overdraft protection services, including a security check to transfer available funds from a linked account, as well as common-sense protection measures, in which Citi will not authorize transactions from debit at ATM or point of sale when funds are not available. [PYMNTS]
JPMorgan lays off hundreds of mortgage division employees as rates rise
JPMorgan Chase is laying off employees this week in response to soaring mortgage rates that rocked the housing market. Hundreds of JPMorgan employees will be laid off, while hundreds more will be reassigned. The layoffs underscore the far-reaching impact of the Federal Reserve’s shift to inflation-fighting mode. Mortgage rates are rising at the fastest pace since 1987 as the Fed takes aggressive action to control inflation. Not only is this hurting demand for new mortgages, it’s also hitting the lucrative refinance industry. [CNN]
Blockchain is not as decentralized as you think
Distributed ledger technology and blockchains, including Bitcoin and Ethereum, may be more vulnerable to centralization risks than initially thought, according to a report by Trail of Bits and commissioned by the Defense Advanced Research Projects Agency of US government. The security firm discovered that outdated Bitcoin nodes, unencrypted blockchain mining pools, and a majority of unencrypted Bitcoin network traffic traversing only a limited number of ISPs could leave room for various actors to gain excessive, centralized control. on the network. He also found that 21% of Bitcoin nodes are running an older version of the Bitcoin Core client, which is known to have vulnerability issues such as consensus errors. [Coin Telegraph]
Fintech Kasheesh wants clients in financial difficulty to say goodbye to BNPL
Buy Now, Pay Later products have become incredibly popular with users, and startups and tech giants such as Apple have taken notice. But the BNPL companies have also drawn some controversy for encouraging less financially secure people to take on debt without fully explaining the associated risks. Kasheesh, a fintech startup that’s less than two years old, came out of hiding today with a product that its founders say can benefit consumers by offering flexibility similar to BNPL, but without taking out a loan. The company’s main product is a web browser extension that allows customers who shop online to split their payments between multiple combinations of debit, credit and gift cards without incurring fees or interest. [Tech Crunch]
