Wednesday, June 29, 2022

Average card interest above 20%; Inflation devastating personal budgets

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Average credit card interest rates have crossed 20%

Rising interest rates have the annual percentages 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. It’s the first time rates have crossed 20% since the tracker launched in 2018. And rates will get 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. During the same period, 229 million people opened new credit card accounts, up from the previous quarter. [CNBC]

Inflation causing 85% of Americans to change their essential purchases

You don’t have to follow the news to know that inflation is raging. Inflation was 8.6% higher in May 2022 than in the previous twelve months. A quarter of respondents indicated that they have limited leeway in their current budget: 27% of respondents’ budgets are already at the limit and another 26% are above budget. About 40% of respondents with credit cards now rely more on it to make ends meet. As for a balance, 26% of respondents have recently used it on their credit card, in addition to the 38% who already had a balance on them. Despite this new dependency, 64% of respondents are somewhat or very concerned that rising interest rates will affect their debt. [Forbes]

US consumer watchdog assesses ‘excessive’ charges for late payment on credit cards

The top US consumer watchdog on Wednesday unveiled a measure that scrutinizes excessive credit card charges and card issuers who disclose more data on income and expenses in an effort to stamp out abuses and boost competition. The advance notice of proposed regulations by the Consumer Financial Protection Bureau confirms a Reuters report that the agency would take a broader approach to what it calls “unwanted fees,” catch for overdrafts, credit card late fees, check bounced fees escalation and other costs. The review, which is the first of a number of related restrictions on junk fees, would specifically assess whether fees for late credit card payments are reasonable and proportionate. [Reuters]

A third of the UK Buy now, pay later Users say they can’t process payments

Nearly a third of shoppers who buy now, use pay later say loan repayments have become “unmanageable”, with the cost of living crisis pushing them into a debt spiral, new research finds. Consumers are spending more on the controversial form of credit, with shoppers using BNPL now paying off an average of 4.8 purchases, nearly double the 2.6 purchases in February. Barclays Bank and the charity StepChange said this was “worrying” as 30% of Britons have used BNPL to buy goods, with nearly a third (31%) of them saying they have fallen into bad debt due to lending. [The Guardian]

US banks finally see an upturn in credit card loans

According to data from the Federal Reserve, total balances on credit card and similar loans at U.S. banks rose 15% on May 25 from a year earlier, and are back near pre-pandemic levels. Even better for banks, cardholders are now spinning more of those balances and incurring interest charges instead of paying them off monthly. During pandemic lockdowns, consumers reduced credit card spending and paid down payments like never before, thanks to incentive payments and cash from mortgage refinancing. The proportion of active card accounts with a revolving balance has risen to 52.6% in the past two quarters after falling to 51.3% during the pandemic. Those balances were generally around 60% during 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 boomed during the pandemic, with PYMNTS finding that “the percentage of consumers who owned crypto at some point in the year rose to 23% in 2021, from 16% in 2020.” After the crypto carnage of recent weeks, confidence is wavering. Consumers’ reasons for buying and holding crypto vary: more than half (55%) of consumers who owned crypto in the past year bought it as an investment. These are typically higher earners as only 15% of consumers making less than $50,000 have owned crypto. [PYMNTS]

Colorado’s Passage of Surcharge Law Leaves Massachusetts and Connecticut as Only States with Surcharge Bans

The new Colorado law, signed Thursday by Governor Polis, limits fees to 2% of the transaction amount or the true cost of the merchant’s transactions, requires consumers to disclose the fee amount prior to the transaction, and prohibits fees. on debit cards. The bill follows precedents from the U.S. Supreme Court and court rulings in other states holding surcharge bans unconstitutionally restricting merchants’ First Amendment rights. Colorado’s passing of the law leaves only two states — Massachusetts and Connecticut — with outlawing surcharges. [Digital Transactions]

Citi Removes Overdraft, Returns Fees on Retail Bank Accounts

Citi has removed overdrafts, credit transfer protection transfers and returned item charges from Citi Retail Banking consumer deposits. Citi said it is the only top five US bank, by asset basis, to abolish Citi Retail Banking’s consumer deposit account fees. The bank added that this change shows how it aims to increase financial inclusion and drive economic progress for the underprivileged. The bank will add overdraft protection services, including a security check to transfer available funds from a linked account, along with common sense safeguards, with Citi not allowing ATM or counter transactions when the funds are unavailable. [PYMNTS]

JPMorgan Fires Hundreds of Mortgage Division Employees Over Interest Rate Spike

JPMorgan Chase is firing workers 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 transferred. The layoffs underline the far-reaching impact of the Federal Reserve’s shift to fight inflation. Mortgage rates are rising at the fastest pace since 1987, as the Fed acts aggressively to tame inflation. This is not only detrimental to the demand for new mortgages, but also affects the lucrative refinancing activities. [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 Trail of Bits report commissioned by the US government’s Defense Advanced Research Projects Agency. The security firm found that aging Bitcoin nodes, unencrypted blockchain mining pools, and a majority of unencrypted Bitcoin network traffic passing over only a limited number of ISPs could leave room for various actors to gain 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 vulnerabilities such as consensus errors. [Coin Telegraph]

Fintech Kasheesh Wants Financially Troubled Clients to Say Goodbye to BNPL

Buy now, pay later products have become incredibly popular with users, and both startups and tech giants like Apple have taken notice. But BNPL firms have also caused some controversy for encouraging people who are less financially secure to take on debt without fully explaining the associated risks. Kasheesh, a fintech startup that is less than two years old, came out of stealth today with a product that its founders say can help consumers by providing flexibility similar to BNPL, but without taking on a loan. The company’s flagship 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 paying any fees or interest. [Tech Crunch]

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