Gen Z Is Ditching Credit Cards for Cash Stuffing in ’90s Throwback
Gen Z is bringing cash back. A staggering 69% of Gen Z is using cash more now than they did 12 months ago, more than Gen X (47%) or the baby boomers (37%), according to a recent Credit Karma report. The findings show a rise in “cash stuffing” by Gen Z’ers learning how to manage their cold hard cash. Cash or envelope stuffing is an old-school budgeting hack, commonly touted by renowned financial adviser Dave Ramsey, that is making a resurgence on social media as Gen Z struggles to get a grasp on finances. The cash-reliant budgeting tactic directs people to divide their money into different categorized envelopes and only spend from the designated stash. Any leftover cash then goes into savings. [New York Post]
Warren Buffett’s Berkshire Hathaway Bet Almost $1 Billion on Credit Card Issuer Capital One
Warren Buffett’s Berkshire Hathaway placed a $954 million bet on credit card and banking company Capital One in the first quarter, one of the few new stakes added by the investment group in a period when it was dumping billions of dollars worth of stocks. The disclosure of the investment on Monday signaled Berkshire’s and Buffett’s comfort with the credit card industry and the health of consumers’ pocketbooks even as several regional banks have been swept up in financial turmoil. [Financial Times]
Americans Are Buried Under Nearly $1 Trillion in Credit Card Debt
With inflation remaining stubbornly high, Americans are piling up a mountain of credit card debt as they use plastic to offset their shrinking purchasing power. Consumers now owe a record $986 billion on their charge cards, up 17% from a year earlier, according to the Federal Reserve Bank of New York. Although it’s never wise to rack up debt, today’s record high interest rates for credit cards can push people into even deeper financial straits. The average annual percentage rate is now 20.92%, higher than any point since the Federal Reserve began tracking card APRs in 1994, according to a recent study from WalletHub. [CBS News]
Venmo Teen Accounts Are Coming Next Month
Venmo is introducing a new service that allows parents to open a Venmo account for children between the ages of 13-17 to send and receive money via the app. Venmo Teen accounts also come with a debit card and controls for parents to monitor transactions and manage their child’s privacy settings. Parents or legal guardians must sign up for a Venmo Teen account on behalf of their children. Each Venmo Teen account is connected to the parent’s personal Venmo account, which allows guardians to send money to their teen, monitor their account balance and transactions, and manage their privacy settings. Up to five Venmo Teen accounts can be managed by a single personal Venmo account. [The Verge]
Visa and MasterCard Agree to Lower Average Credit Card Interchange Fee Below 1% in Canada
The Canadian government has announced new details of an agreement with Visa and MasterCard that will see them lower the amount that they charge retailers when a customer pays for a purchase with a credit card. The deal will reduce interchange fees for in-store transactions to 0.95%, on average. That means on a $100 purchase, if a customer pays with a credit card, the retailer will get at least $99, where they previously would have kept as little as $97 in some cases. A government release says on average, the deal will reduce the typical fee that a merchant pays by 27%. [CBC]
Fed Officials Less Confident on the Need for More Rate Hikes, Minutes Show
Federal Reserve officials were divided at their last meeting over where to go with interest rates, with some members seeing the need for more increases while others expected a slowdown in growth to remove the need to tighten further, minutes released Wednesday showed. Though the decision to increase the Fed’s benchmark rate by a quarter percentage point was unanimous, the meeting summary reflected disagreement over what the next move should be, with a tilt toward less aggressive policy. The Fed appears now to be moving toward a more data-dependent approach in which myriad factors will determine if the rate-hiking cycle continues. [CNBC]
This Stanford Grad Is Taking on Pawn Shops with a New Credit Card Startup
In recent years, there’s been no shortage of startups offering credit lines to the underbanked. Now, a startup founded by Stanford grad James Savoldelli has found a new wedge into the same industry, and it’s through pawn shops. Called Pesto, the idea is creative and savvy. For those in dire financial straits, pawn shops are a bank of last resort. A customer with a government ID can simply leave behind something of value and receive a secured loan in return for a percentage of the value of that item, plus interest. If he or she pays off the loan, that person can retrieve the item; otherwise, it’s forfeited and sold. But such loans can be egregiously expensive. Pesto hopes to capture some of those individuals online before they start down that path, in part by offering them a secured MasterCard that features up to a 29.99% APR, but 0% interest if someone pays back their loan in full on time. [Tech Crunch]
Klarna Introduces Credit Opt Outs
Klarna has updated its app to provide budget-conscious Brits with a tool to opt out of taking on more debt and called on credit card companies and other providers to follow suit. To activate the credit ‘opt out’, consumers enter the ‘settings’ tab in the Klarna app and select, ‘deactivate credit’. Once credit has been deactivated, consumers are taken to a page of resources and support for those dealing with indebtedness and they will no longer be able to use Klarna Pay in 30, Pay in 3 or Financing products. The initiative has been welcomed by consumer groups which have been campaigning for stricter regulation of BNPL providers in the midst of a cost-of-living crisis. [Finextra]
Banks, Credit Unions Outraged by CFPB’s $8 Credit Card Late Fee Plan
Rohit Chopra, the CFPB Director, wants to slash $9 billion a year in late fees currently charged by credit card companies. Since banks and credit unions currently collect $12 billion a year in late fees, the bureau has set itself up for a massive fight that is widely expected to end in contentious litigation. While the cost to assess a late fee on a credit card may be minimal, the CFPB’s proposal in February to slash credit card late fees to just $8 a month, down from the current $30 for a first offense and $41 for subsequent violations, has raised major questions about how banks and credit unions set late fees, including the costs of debt collection and losses from delinquent borrowers. [American Banker]
Australia Hits Buy-Now-Pay-Later Sector with Consumer Credit Law
Australia said it would regulate buy-now-pay-later services as a consumer credit product under new laws, forcing BNPL providers to carry out background checks before lending in what would be one of the world’s toughest regimes for the startup sector. The move would put companies like Afterpay and Zip under the watch of the Australian Securities and Investments Commission, and Australia behind only Britain among countries that have sought to regulate BNPL as a standard credit product. [Reuters]
Mastercard Rolls Out Its First Credit Card for Visually Impaired Consumers in the U.S.
Mastercard will roll out its first U.S. credit card for visually impaired consumers, done in partnership with Citizens Financial Group. Citizens’ new private-client credit card will feature a square notch on the side of the card meant to signify to blind and partially sighted customers that the card is a credit card, the company said. Citizens ultimately intends to roll out the accessible cards across its broader portfolio, including debit cards, which will feature round notches, and prepaid cards, which will have triangular notches. [MarketWatch]
Millennials, Gen Z Use Mobile Banking 5x More Than Their Parents
Banking customers increasingly favor using their smartphones to conduct online financial activities and transactions by wide margins. While 58% of retail banking customers reported smartphones as their go-to devices for online financial activities, millennials were 18% more likely and Generation Z consumers were 23% more likely to say their phones were their preferred devices. In addition, 57% of consumers believe smartphones and computers are equally secure for sending and receiving money, and 56% said the same for accessing bank accounts. Slightly larger shares of consumers consider smartphones more secure than computers for sending and receiving money and for making online purchases. The opposite is true for accessing bank accounts and paying bills, rent or loan payments. [PYMNTS]
Despite Higher Costs, Americans Are Still Prioritizing Travel This Summer
Despite today’s high-inflation environment, Americans are still willing to spend to go on vacation. Transunion’s latest 2023 Spring and Summer Travel Report, 46% of respondents said they planned to travel more this spring and summer than they did last year, with 47% planning to travel the same amount and only 8% saying they planned to travel less. Not only are Americans traveling again, but many households are planning to travel more and take longer trips than they have in the past. Even households with more family members aren’t letting higher costs get in the way of their travel plans. In fact, the data showed that nearly half of families with children plan to spend more on travel this year. [Fortune]
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