Americans’ Credit Card Debt Hits a Record $1 Trillion
Americans’ credit card debt levels have just notched a new, but undesirable, milestone: For the first time ever, they’ve surpassed $1 trillion, according to data released Tuesday by the Federal Reserve Bank of New York. During the second quarter, credit card balances shot up by $45 billion, or nearly 4.6%, to land at $1.03 trillion, according to the New York Fed’s latest Quarterly Report on Household Debt and Credit. Rising credit card debt and auto loan balances helped to drive overall household debt levels up 1%, to $17.06 trillion for the quarter. Overall household debt has spiked by $2.9 trillion since the end of 2019, before the pandemic. [CNN]
Average Consumer Carries $5,947 in Credit Card Debt, a 10-Year High
Credit card balances are up almost 20% from a year ago, according to a quarterly credit industry insights report from TransUnion. The average balance per consumer rose to $5,947, the highest in 10 years, TransUnion found. Not only are balances higher, but more cardholders are also carrying debt from month to month, according to another Bankrate report. Of those carrying card balances, 60% have been in debt for at least a year. [CNBC]
Credit Card and Car Loan Delinquencies Pass Pre-Covid Levels as Consumers Get Squeezed
More Americans are failing to make payments on their credit cards and auto loans, another sign of rising financial pressure on consumers. New credit card and auto loan delinquencies have now surpassed pre-Covid levels, according to a Wednesday report issued by Moody’s Investors Service. The rate of new credit card delinquencies hit 7.2% in the second quarter, up from 6.5% in the first quarter. [CNN]
Credit Card Rewards Still Safe as Congress Sets Aside Credit Card Competition Act
Your credit card rewards are safe, at least for now. The Credit Card Competition Act has been sidelined. The CCCA aims to lower the “swipe fees” that merchants pay to process credit card transactions. But banking industry groups say lowering those fees could dry up the funds that banks use to provide credit card points, miles and cash-back bonuses. The act had gained little traction until its main Senate sponsors, Sens. Richard Durbin (D-Ill.) and Roger Marshall (R-Kan.), loudly pushed for its inclusion in the National Defense Authorization Act. The CCCA ultimately did not appear in that bill, but proponents believe it could still resurface later. [Forbes]
Visa Profits Rise as Global Customers Increasingly Use Credit and Debit Cards Instead of Cash
Visa said its adjusted third-quarter profits rose by nearly double digits, as the global payments company continues to benefit from the broad shift by consumers to using credit and debit cards instead of cash. Visa said its payments volume rose 9% from a year earlier, while the number of processed transactions on Visa’s network increased 10% from a year earlier. Visa gets a fee from merchants and businesses who use its payment network to process transactions, so Visa’s profits rise and fall with the global economy as well as customers choosing to use a Visa debit or credit card over its competition or cash. [Associated Press]
Credit Card Issuers Driving for Deposits: A Back End Strategy for Liquidity
The word for the day in banking is “liquidity,” so several top credit card lenders offer savings accounts to increase deposits. With large swaths of customer relationships, well-designed strategies to spawn deposits can expand the cardholder relationship and improve bank liquidity through increased deposits. A recent trend by credit card banks is to offer high-yield savings accounts. You might not find a branch bank on every street corner, but these institutions have mastered the art of fast money movement, ACH, and direct deposit. A Discover Online Savings Account will pay you a whopping 4.30%. At Capital One, you will find a high-yield rate of 4.3%, with American Express High Yield Savings running slightly behind at 4.15%. [Payments Journal]
Is Apple Now the World’s Biggest Fintech Disruptor?
Since the introduction of Apple Pay in 2014, Apple has expanded its range of financial products. The services it offers now extend beyond payments, and include both long and short term (BNPL) credit, savings, identification, credit rebates, and tools for merchants to take card payments. For a service that doesn’t get a lot of attention, Apple Pay is a strategically important element to the company’s future plans. That’s clear. The company quite clearly has plans to build even more blocks onto the overall offer. Its recent acquisition of CreditKudos gives it a chance to take more control over payments approval and processing, potentially reducing its reliance on payment processing companies. More immediately, there’s some expectation more Apple device subscription services may appear. [Computerworld]
A Staggering 51% of Parents Now Worry They’ll Have to Put Off Retirement After Cosigning Their Kids’ College Loans
A recent LendEDU survey found that 35% of cosigners regret cosigning on a private student loan and 34% said they wouldn’t make the same decision again if they could turn back time. The survey found that 56.8% of cosigners believe their credit scores have been negatively impacted by cosigning on private student loans. About one-third of cosigners reported their children have made late payments that negatively impacted their credit score, hurting their ability to get mortgages, auto loans and other financing. And many worry this help they’re offering may threaten their long-term financial security. Over half of parents who cosigned their children’s educational loans think the debt is putting their retirement in jeopardy. [Yahoo Finance]
The Many Ways Contactless Payments are Transforming Mass Transit
The pandemic caused fears of a doom loop in mass transit systems, which were largely shut down in the early days of the crisis, and were slow to recover as the rest of society opened. But many cities used the downtime to install some much-needed upgrades to entice riders to return. Payment companies jumped into the fray, deploying ticketing systems that rely on contactless cards and mobile devices. The idea was to reduce the traditional cards that could only be used in the transit networks, replacing them with a cleaner and more open method of ticketing that in theory would encourage digital payments at merchants near the transportation systems. [American Banker]
Greenlight Launches Credit Builder for Teens
Greenlight Financial Technology has launched a credit builder for teens that’s designed to help parents raise financially smart kids. With the Greenlight Family Cash Card, teens can build and manage their credit responsibly while parents can set flexible spending limits and get real-time purchase. This new credit builder helps solve the problem that 84% of teens age 18 to 19 have zero credit history, “making it difficult to start adulthood with financial independence,” the company said. Greenlight has also found that 94% of parents agree that credit knowledge and skills are important for their teens’ futures, yet there is a dearth of tools and resources to educate them about credit. Nearly half of teens (49%) also report to have experienced significant financial stress and anxiety. [PYMNTS]
Japan’s Struggling Rakuten to Combine Credit Card and Mobile Payments Business
Japan’s Rakuten Group will fold its payments and points businesses into its credit card unit. Despite strong revenue from its core e-commerce offerings, Rakuten has lost money for 12 straight quarters, hit by the costly build-out of its mobile phone business, which has failed to gain traction in Japan. The company said on Thursday it plans to consolidate its payments and points businesses and fold them into Rakuten Card, its credit card and loans unit. Points and payments are at the heart of Rakuten’s ecosystem, which is designed to draw customers into its broad spectrum of offerings. Users accumulate points by using Rakuten credit cards, shopping and insurance services. The points can be used to buy groceries, pay bills or book travel. [Reuters]
Citi Enhances Its My Deals Platform for Cardholders
Citi has enhanced its offers to its My Deals platform, previously called Citi Easy Deals. Citi Diamond Preferred cardmembers can now access My Deals on the Citi mobile app and Citi Online for national and local coupons and discounts across different experiences, offered according to the cardmember’s locations. Citi Online is the bank’s online portal for customer accounts, where cardmembers can go to make their monthly payments, redeem rewards, and monitor all their Citi accounts in one place. [CU Today]
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