Here’s Why Your Credit Card Perks Could Be Going Away
Simply put, the Credit Card Competition Act of 2023 would kill the funding for credit card rewards programs and allow retailers to pocket the savings from lower interchange fees, also known as swipe fees. With lower fees collected, consumers would lose out on rewards, purchase protection and fraud protection while retailers add to their bottom line. The retail lobbyists are trying to convince consumers that this would lead to lower prices; however, we know that retailers won’t pass along those savings, because we know the impact of the Durbin Amendment, and it was a huge loss for consumers. [The Points Guy]
New Credit Card Regulations Will Hurt Consumers and Small Business
Proposed government regulations would change how credit card payments are processed, impacting how much financial institutions can charge merchants for payment transactions. The Credit Card Competition Act of 2023 would require every credit card transaction to have two networks, one of them not Visa or Mastercard, enabled to route transactions. Under the proposed regulation, merchants would have the option to route transactions to other lower-cost networks (lower-cost to the merchants, that is). The proposed bill, as described by its sponsors, would increase competition by enabling merchants to select payment networks other than Visa and Mastercard. The real impact, however, would be just the opposite. The government is creating a game of whack-a-mole: Increased competition in one sector will lead to diminished competition in another. It’s ironic that proposed financial regulations from sponsors who want to see large financial firms broken up will actually make them larger. [Forbes]
Consumer Credit Growth Slows as Lending Standards Tighten
Higher interest rates are starting to chill consumer credit growth. Most types of consumer credit products are showing signs of weakness. Growth in outstanding auto loan balances faded to 5.4% in May, from 5.6% in April. Growth in credit card balances, meanwhile, moderated from 17.9% to 17.5%. That said, the share of borrowers who carry a monthly balance on their credit cards is trending above pre-pandemic levels. Delinquency rates for credit cards and auto loans will increase this year. The delinquency rate for all consumer credit products increased to 1.49% in May. [Kiplinger]
Bank of America Issued Credit Cards to People Without Consent: CFPB
Bank of America employees for years have been quietly opening new credit card accounts for people without their knowledge, the CFPB said on Tuesday. Since at least 2012, the bank’s staff, wanting to reach their sales incentives, used information from consumers’ credit reports to submit bogus account applications. Meanwhile, those affected neither knew about these applications nor gave consent for their credit reports to be used. The CFPB ordered the bank to pay a combined $100 million to affected customers and a total fine of $150 million. [Business Insider]
The Coming Credit Crunch Could Crush the Economy
Troubling developments are happening in the credit markets. The federal funds rate is above 5%, close to where it was in 2007, the last time the economy started to tip into a major recession and financial crisis. We are already starting to hear creaks and groans from within the markets. Capital One, one of the country’s largest personal lending companies, has been raising concerns about credit card delinquencies since April. It’s not alone: Delinquency rates are also rising for Discover and Bread Financial. The rate of increase seems particularly high among those ages 18 to 29. [The New York Post]
CFPB Urged to Abolish Deferred Interest
The CFPB was urged to eliminate deferred interest during a hearing Tuesday that addressed the problems associated with medical credit cards and other payment products. Panelists who spoke during the agency’s hearing on medical financing and healthcare debt said deferred interest has saddled patients with exorbitant levels of medical debt. Deferred interest credit cards offer no interest during a promotional period, but interest is retroactively applied if the entire balance is not paid in full by the end of that period, including on portions of the balance already paid off. [Payments Dive]
Apple Card Entices New Cardholders with 10% Boost to Daily Cash for a Limited Time
Apple Card has plenty of perks already, but for anyone who hasn’t signed up for the credit card yet, Apple is looking to offer a hefty Daily Cash incentive to try and convince them. Like most other credit cards, Apple’s card offers a percentage back on purchases made. Apple calls this Daily Cash, and the funds are automatically deposited into a couple of different locations, depending on your setup. Apple is hosting a limited-time promotion for new card customers, which sees their Daily Cash boosted to 10% for the first six months, up to $100. [Apple Insider]
Personal Financial Management Is the Next Must-Have for Mobile Banking Apps
Personal financial management tools built into mobile banking and credit card apps are rapidly becoming a table stakes item for financial institutions. The implications are serious for a variety of reasons. If the PFM functionality is well done, the apps could prove to be stickier in terms of customer retention, a key advantage. However, the flip side of that advantage is that many consumers are shopping around. People are splitting off part of their primary banking accounts to try out other financial providers. The incumbent providers run the risk that, if a competitor’s app is better, consumers could decide to consolidate more of their financial business at this new home. [The Financial Brand]
$1 for $20? Republican Presidential Candidate Promises to Give Gift Cards to Donors
Republican presidential candidate and North Dakota Gov. Doug Burgum is promising a $20 gift card to supporters who donate $1 to his presidential campaign. The governor confirmed on Twitter that the donors will receive a Visa or Mastercard gift card to their mailing address, adding “I’m not messing around!” The Republican National Committee has said in order to participate in the GOP debate next month in Milwaukee, candidates must have received contributions from at least $40,000 individual donors and at least 200 unique donors in 20 or more states. [USA Today]
Crypto Industry Secures Early Victory in Legal Battle With Regulators
The cryptocurrency industry secured an early victory in its court battle with U.S. regulators when a federal judge ruled on Thursday that the sale on public exchanges of a digital asset called XRP complied with securities laws. For years, the Securities and Exchange Commission has argued that digital assets constitute securities, like stocks and bonds traded on Wall Street, and should be subject to the same strict regulations. Last month, the SEC sued two of the largest crypto exchanges, Coinbase and Binance, accusing them of marketing unregistered securities to the public. But the ruling on Thursday in a case involving the crypto company Ripple may complicate that argument and provide fodder for the crypto industry to defend itself in court. [The New York Times]
60% of Millennials Are Interested in Bank-Based BNPL Plans
Buy now, pay later plans seem to be everywhere, but the greenfield opportunity remains relatively untapped. A new study found that 50 million consumers used BNPL through 2022. And the appeal of paying by installments, as relayed to us by more than 2,200 consumers, cuts across demographics and income levels. The impetus is there, then, for traditional financial institutions to make inroads into the space. Research showed that a significant percentage of consumers want access to BNPL plans offered by banks rather than FinTechs, at 70% of respondents; 36% of respondents who were not currently BNPL users said they would opt for one offered by a bank over a FinTech. [PYMNTS]
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