This Week In Credit Card News: Average Card Interest Rate Tops 20%; Inflation Wrecking Personal Budgets

This Week In Credit Card News: Average Card Interest Rate Tops 20%; Inflation Wrecking Personal Budgets

Average Credit Card Interest Rates Have Topped 20%

Rising interest rates have pushed the annual percentage rates on credit cards to new highs. The average annual percentage rate on a new credit card is now more than 20%, according to LendingTree’s tracker. It’s the first time that rates have topped 20% since the tracker began in 2018. And rates are poised to go even higher across the board. Credit card balances reached $841 billion in the first three months of the year, according to a report from the Federal Reserve Bank of New York. In the same timeframe, 229 million people opened new credit card accounts, an increase from the previous quarter. [CNBC]

Inflation Causing 85% Of Americans to Adjust Their Essential Purchases

You don’t have to follow the news to know inflation is raging. Inflation in May 2022 was up 8.6% from the past twelve months. A quarter of respondents selected that they only have a little wiggle room in their current budgets: 27% of respondents’ budgets are already at the limit and another 26% are over budget. To make ends meet, approximately 40% of respondents with credit cards now rely more on them. As for a balance, 26% of respondents have recently started carrying them on their credit cards, in addition to the 38% who were already carrying a balance. Despite this new reliance, 64% of respondents are somewhat or very concerned that rising interest rates will impact their debt. [Forbes]

U.S. Consumer Watchdog to Review ‘Excessive’ Credit Card Late Payment Fees

The top U.S. consumer watchdog on Wednesday unveiled a measure that would scrutinize excessive credit card fees and demand card issuers disclose more data around revenue and expenses in a bid to stamp out abuses and boost competition. The advance notice of proposed rulemaking issued by the Consumer Financial Protection Bureau confirms a Reuters report that the agency would escalate a broader crackdown on what it calls “junk fees,” a catchall for overdraft, credit card late-payment fees, bounced-check fees and other charges. The review, which is the first of a number of related curbs on junk fees, would specifically assess whether credit card late fees are reasonable and proportional. [Reuters]

A Third of UK Buy Now, Pay Later Users Say They Can’t Handle Payments

Almost a third of shoppers who use buy now, pay later credit say repayments on the loans have become “unmanageable”, with the cost of living crisis pushing them into a debt spiral, new research has found. Consumers are spending more via the controversial form of credit, with shoppers who use BNPL now paying off an average of 4.8 purchases, almost double the 2.6 purchases in February. Barclays Bank and the debt charity StepChange said this was “concerning” because 30% of Britons have used BNPL to buy goods, and of these, almost a third (31%) saying the lending had got them into problem debt. [The Guardian]

U.S. Banks Finally See Upturn in Credit Card Borrowing

Overall balances on credit card and similar loans at U.S. banks are up 15%, as of May 25, from a year earlier, and back near pre-pandemic levels, according to Federal Reserve data. Even better for banks, cardholders now are allowing more of those balances to revolve and incur interest charges instead of paying them off monthly. During pandemic lockdowns consumers reduced credit card spending and paid down balances like never before, thanks to stimulus payments and cash from refinancing mortgages. The share of active card accounts with revolving balances share has increased for the past two quarters to 52.6% after plunging to 51.3% in the pandemic. Those balances generally prevailed at around 60% level for the seven years before Covid-19, after being as high as 70% during the 2008 financial crisis. [Reuters]

23% of Consumers Have Held Crypto in the Past Year

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Consumer interest in crypto bloomed during the pandemic, with PYMNTS finding that “the percentage of consumers who held crypto at some point during the year rose to 23% in 2021 from 16% in 2020.” After the crypto bloodbath of recent weeks, confidence is wavering. Consumers’ reasons for buying and holding crypto differ: more than half (55%) of consumers who have held cryptocurrency in the past year bought it as an investment. These are typically higher earners, as only 15% of consumers making under $50,000 have held crypto. [PYMNTS]

Colorado’s Passage of Surcharge Law Leaves Massachusetts and Connecticut As Only States With Surcharge Bans

The new Colorado law, signed by Governor Polis on Thursday, caps surcharges at either 2% of the transaction amount or the merchant’s actual cost of the transactions, mandates disclosure of the surcharge amount to consumers prior to the transaction, and prohibits surcharges on debit cards. The bill aligns with U.S. Supreme Court precedent and legal decisions in other states ruling that surcharge bans unconstitutionally restrict merchants’ First Amendment rights. Colorado’s passage of the law leaves just two states—Massachusetts and Connecticut—with surcharging bans. [Digital Transactions]

Citi Removes Overdraft, Returned Item Fees on Retail Banking Accounts

Citi has removed overdraft, overdraft protection transfer and returned item fees from Citi Retail Banking consumer deposit accounts. Citi said this makes it the only top five U.S. bank, based on assets, to do away with the fees for Citi Retail Banking consumer deposit accounts. The bank added that this change shows how it wants to increase financial inclusion and boost economic progress for the underserved. The bank will add overdraft protection services, including a safety check to transfer available funds from a linked account, along with common sense protection measures, in which Citi won’t allow ATM or point-of-sale debit transactions when the funds aren’t available. [PYMNTS]

JPMorgan Lays Off Hundreds of Employees in Mortgage Division as Rates Spike

JPMorgan Chase is laying off employees this week in response to the spike in mortgage rates that has rocked the housing market. Hundreds of JPMorgan employees will be laid off, while hundreds of others will be reassigned. The layoffs underscore the wide-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 moves aggressively to tame inflation. Not only is that hurting demand for new mortgages, but it’s hitting the lucrative refinancing business, too. [CNN]

Blockchain Isn’t 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 United States government’s Defense Advanced Research Projects Agency. The security firm found that outdated Bitcoin nodes, unencrypted blockchain mining pools and a majority of unencrypted Bitcoin network traffic traversing over only a limited number of ISPs could leave room for various actors to garner excessive and centralized control over the network. It also found that 21% of Bitcoin nodes are running an older version of the Bitcoin Core client, which is known to have vulnerability concerns such as consensus errors. [Coin Telegraph]

Fintech Kasheesh Want Financially Strained Customers to Say Bye to BNPL

Buy Now, Pay Later products have become incredibly popular with users, and both startups and tech behemoths such as Apple have taken notice. But BNPL companies have attracted some controversy, too, for encouraging people who are less financially secure to take on debt without fully explaining the associated risks. Kasheesh, a fintech startup that’s less than two years old, came out of stealth today with a product its founders say can benefit consumers by offering flexibility that’s similar to BNPL, but without taking on a loan. The company’s main product is a web browser extension that allows customers shopping online to split their payments across multiple combinations of debit, credit and gift cards without having to pay a fee or interest. [Tech Crunch]

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