Credit Card Debt Keeps Falling. Banks Are on Edge
Americans are paying down their credit card debt at levels not seen in years. That is good news for everyone but credit card issuers. Large card issuers say that overall card balances—and thus the firms’ interest income—are falling. To make up for it, issuers are spending more on marketing and loosening their underwriting standards. Discover said the share of card balances that were paid off at the end of the first quarter was at the highest level since 2000. Capital One said that nearly half of the credit card balances it had at the beginning of March were paid off by the end of the month, which the company described as historically high. Synchrony Financial, the largest issuer of store credit cards in the U.S., said payment rates have been higher than they averaged before the pandemic. [The Wall Street Journal]
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U.S. Households Borrow More Than Ever, Just Not on Credit Cards
Americans increased their borrowing to a record of $14.6 trillion in March, driven by home and auto loans. But the growth masked what Federal Reserve Bank of New York researchers called a “confounding” decline in credit card balances during a quarter when retail sales soared and travel resumed. Credit card balances shrank by $49 billion in the first quarter, the second-largest quarterly decline since the data started being compiled in 1999. The largest was in the second quarter of 2020, when business activity was frozen by lockdowns. Credit card balances are now $157 billion lower than they were at the end of 2019, before the covid-19 health crisis hit. [Bloomberg]
JPMorgan, Others Plan to Issue Credit Cards to People with No Credit Scores
Some of the largest U.S. banks plan to start sharing data on customers' deposit accounts as part of a government-backed initiative to extend credit to people who have traditionally lacked opportunities to borrow. JPMorgan Chase, Wells Fargo, U.S. Bancorp and others will factor in information from applicants' checking or savings accounts at other financial institutions to increase their chances of being approved for credit cards. It is aimed at individuals who don't have credit scores but who are financially responsible. The banks would consider applicants' account balances over time and their overdraft histories. [The Wall Street Journal]
College Students are Spending More on Credit Cards
Nearly a third of college students say their families have been financially impacted by the Covid-19 pandemic, according to a recent survey. As a result, 19% expect to take on more debt. Some of that debt, it seems, will be on credit cards. Half of college students, 53%, are charging purchases to two or more credit cards, up from 41% last year and nearly double the 25% in 2012. Many students will likely carry balances on these cards: 38% do not plan to pay off their bill each month. About 40% say they currently have at least $1,000 in credit card debt and 14% report having more than $5,000. [CNBC]
Rising Gasoline Prices: Bad for Consumers, Good for Credit Cards
Gasoline prices in the United States, for regular gasoline, increased from an average of $2.015 per gallon in November 2020, to the current level of $2.771, according to the US Energy Information Administration. Now, with the Colonial Pipeline cyberattack, the average cost of gas is expected to push past $3.00 per gallon, the highest rate since 2014. With increasing prices and looming inflation, credit card issuers will see increased card spend, 40% or so, which will bleed over into revolving debt. [Payments Journal]
A Fed Report on Debit Costs Could Fuel a Movement to Reduce a Decade-Old Fee Cap
Pressure may be building on the Federal Reserve to take action on a debit card interchange fee regulation that it has left intact for 10 years despite sweeping changes in the payments business, including an onrush of e-commerce transactions over the past year. A report from the Fed indicated that issuers’ authorization, clearing, and settlement costs for debit have declined dramatically. In 2019, those costs came to 3.9 cents per transaction, roughly half the costs in 2009. [Digital Transactions]
Debt Collectors Spending Big to Block a Crackdown
Two months ago, debt collectors won a victory when congressional lawmakers allowed stimulus checks to be garnished by creditors and government agencies. Now, as the credit industry hits a jackpot during the pandemic, the leading lobby group for debt collectors has more than tripled the amount of cash it funnels to lawmakers as it campaigns to block upcoming Democratic legislation to protect millions of Americans from the repo man. At issue is a package of bills designed to restrict the $13 billion debt collection industry, as new Federal Reserve and Census Bureau reports show consumer and medical debt has skyrocketed during the pandemic. [Daily Beast]
Chase Adds DoorDash Perks to Most Co-Branded Credit Cards
Previously, Chase offered a complimentary DashPass membership on their branded cards. Now, Chase is extending DoorDash benefits to most of its co-branded cards. Eligible cardholders will get 5% in DoorDash credit on pickup orders and a one-year complimentary DashPass membership, which offers free delivery and reduced service fees on orders of $12 or more with participating restaurants, convenience stores, and grocery stores. [Investopedia]
The Numbers Behind Younger Users’ Love Affair with Mobile Wallets and Online Banking
While mobile-wallet ownership holds steady at 45%, younger consumers are embracing the payment technology more readily than they were 10 months ago, according to a research from FIS
Here’s How Much Your Personal Information is Worth to Cybercriminals – and What They Do with It
Data breaches have become common, and billions of records are stolen worldwide every year. Most of the media coverage of data breaches tends to focus on how the breach happened, how many records were stolen and the financial and legal impact of the incident for organizations and individuals affected by the breach. But what happens to the data that is stolen during these incidents? [The Conversation]
