1 in 3 Americans Overspent During the Holidays, Boosting Credit Card Balances
Holiday sales are on track to grow as much as 11.5% over 2020, according to a projection by the National Retail Federation. About 30% of Americans said they overspent during the gift-giving season, according to a post-holiday survey by WalletHub. Although omicron drove a new wave of infections, 56%, said Covid did not affect their plans. For most shoppers, increasing their spending also meant relying more on credit cards or buy now, pay later financing to spread out their expenses. As a result, roughly 36% of consumers went into debt, owing an average of $1,249, according to a survey by LendingTree. [CNBC]
Who is really buying cryptocurrency?
Crypto Use Rising, Most Will Use It for Mobile Purchases
More than a third of consumers between the age 18-54 own cryptocurrency according to a recent study by Cantaloupe, with people ages 18-34 most likely to own it (37%), and individuals 35-54 (33%) trailing only slightly. Further, 67% of those who own crypto are willing to consider using it for purchases if it were linked to a mobile wallet, with an additional 19% saying they would consider using crypto linked to a mobile wallet if it were easy. [Vending Times]
User Experience Reigns in Credit Card Decisions
A super-low interest rate might seem like the most tantalizing perk to dangle in front of would-be credit card holders, but research shows there are myriad other factors consumers take into consideration when deciding whether to use one card over another. According to new research, user experience benefits like cash-back rewards, data privacy and credit building tools are considered by 75% of consumers. The research indicated that 70% of those seeking a card considered data security a top priority, and 75% of active users that are also parents look for credit-building tools when considering a card. [PYMNTS]
The Data Around U.S. Credit Card Line Utilization
U.S. credit card lines, the amount that issuers underwrite for each open account, are at a historic high. In the latest numbers published by the Federal Reserve, total credit lines amount to $3.9 trillion. However, only 27% of these credit lines are in use, and $3 trillion is available in open credit. Note that line utilization is on the downswing, based on a 20.3% utilization rate. In contrast, the utilization rate in 2009 was 27.7% after credit card issuers began to contract credit lines during the Great Recession. [Payments Journal]
MORE FOR YOU
JPMorgan Chase Has Unleashed a Lawsuit Blitz on Credit Card Customers
After a nearly decade-long pause, Chase has resumed suing indebted customers. The bank is back to its old ways, say consumer lawyers. Starting in early 2020 and continuing to today, Chase has filed thousands of lawsuits against credit card customers who have fallen behind on their payments. Chase had stopped pursuing credit card lawsuits in 2011, in the wake of the last major economic downturn, after regulators found that the company was filing tens of thousands of flimsy suits, sometimes overstating what customers owed. Today, just as it did before running afoul of the CFPB, Chase is mass-producing affidavits from the same San Antonio office where low-level employees generated hundreds of thousands of affidavits in the past, according to defense attorneys and court documents. [ProPublica]
Bank Tech Trends to Watch in 2022
Bank technology initiatives this year will be driven by the need to make finance ultraconvenient for consumers and businesses. One manifestation of this is embedded banking, a version of the open banking movement started in Europe, where banks offer their services through all manner of companies that aren’t banks. Another is the effort banks are making at personalization, trying to deliver just-in-time advice to consumers to help them avert financial problems and take advantage of opportunities. And letting customers authorize themselves with a selfie and facial recognition is the ultimate way to provide security for couch potatoes. Banks and fintechs also will continue to try to become a trusted place for consumers and businesses to go for cryptocurrency services as the popularity of digital assets keeps growing. [American Banker]
The Explosive Growth of Mobile Payments for Cross-Border Transactions
The amount of money crisscrossing the globe each year is staggering, with $156 trillion expected to cross international borders annually by 2022. These payments include everything from multibillion-dollar corporate acquisitions to small value remittances sent by migrant workers, but one of the most quickly growing market segments is individual consumer transactions for goods and services. One major contributor to this growth is the surging popularity of mobile commerce, with consumers using their smartphones to purchase items ranging from toilet paper to computers to automobiles. Mobile commerce is expected to grow by 70% in the next five years. [PYMNTS]
Washington Puts “Buy Now, Pay Later” Industry on Notice
The buy now, pay later industry, an increasingly important driver of retail sales, could face new rules as D.C. scrutiny builds. The Consumer Financial Protection Bureau is peering into the policies of Affirm, Afterpay, Klarna, PayPal and Zip, a few of the most notable players in the BNPL industry. The CFPB is concerned these platforms may encourage overspending and dodge existing regulations around credit and lending. It also plans to examine data collection practices. [Axios]
Credit Card Startup Petal Reaches an $800 Million Valuation
Petal, a credit-card startup, has raised $140 million in a funding round led by Tarsadia Investments. The funding round values the company at $800 million. The startup offers a solution to consumers who don’t qualify for traditional credit cards, or who have no credit history. Its technology measures creditworthiness on income, spending, and savings in a process it refers to as “CashScoring,” and has approved almost 300,000 credit cards to date. The company says its members with no prior credit history have achieved an average credit score of 676, which then qualifies them for other loans and mortgages that were previously unavailable. [Bloomberg]
Visa, Mastercard Enlist Fintechs to Reach Latin America’s Unbanked
Visa and Mastercard are courting fintechs to help them reach more consumers in Latin America, where a substantial unbanked population has otherwise turned to nonbanks for financial services. Because tech companies have succeeded in reaching a market that banks have underserved, technology partnerships have become vital to the U.S. card networks’ efforts to expand across borders. [American Banker]
Bank of America CEO: Consumers Spending at Fastest Pace He’s Seen
The head of the nation’s second-largest bank said consumers are spending “at a faster rate” than he’s ever seen but he remains concerned about how inflation and supply-chain issues will influence the economy going into the winter. Bank of America Chairman and CEO Brian Moynihan said spending on the bank’s debit and credit cards has surged as the economy recovered from recession. But Moynihan also said a recent decline in consumer sentiment—by one measure to the lowest point in a decade—may indicate higher costs are adding to Americans’ frustration with the ongoing pandemic. [Associated Press]
The Citi Prestige Has Made Its $250 Annual Travel Credit More Flexible for Another Year
In the wake of coronavirus, Citi has attempted to keep its Citi Prestige cardholders from canceling by tweaking its benefits. It’s a travel credit card, after all, and its price tag of $495 for the primary cardmember is difficult to justify if you’re not traveling. For the third consecutive year, Citi is expanding the yearly travel credit worth up to $250 to include supermarket and restaurant spending. [Business Insider]
