America’s reliance on credit cards is growing. Fed rate hike will make things more painful
As prices continue to rise, Americans are increasingly reliant on credit cards to make purchases. And now, with the Federal Reserve’s latest three-quarter percentage point hike, many of them will be paying more for the debt they’ve accumulated. At just over 18%, the average annual percentage rate on new credit cards is less than one percentage point from its all-time high of 19% set in July 1991. TransUnion found that there are more credit cards today, and there are more debt on these cards. TransUnion said 161.6 million people in the United States, or about half of the total population, have access to a credit card in the second quarter, a jump from 153.3 million a year earlier. During the same period, the average debt per borrower rose from $4,817 to $5,270. [CNN]
Average credit card debt per borrower has increased nearly 10% over the past year.
Some consumers are using credit card rewards to pay for essentials amid high inflation
Americans are looking to credit card rewards to help offset rising costs of everyday shopping due to inflation concerns. A Wells Fargo study found that 92% of Americans are worried about rising inflation, and nearly half of rewards cardholders have used these earned benefits to help offset the price of certain day-to-day expenses. Nearly three-quarters (71%) of Americans said they have rewards cards, and 45% of rewards cardholders said their credit card use had increased during the pandemic. Additionally, two-thirds of rewards cardholders (65%) said they care about credit card rewards more than ever. [Fox Business]
House lawmakers add credit card competition bill
A companion bill targeting Visa and Mastercard dominance was introduced in the House on Monday by Reps. Peter Welch (D-VT) and Lance Gooden (R-TX), following the Senate’s version of such a legislation that landed in July. The bill aims to inject more competition into the credit card network industry by requiring a minimum number of networks through which to route credit transactions, at least one being a network other than Visa or Mastercard. This could include smaller rivals like NYCE or Shazam, or other big credit card companies like American Express or Discover Financial Services. [Payments Dive]
GOP attorneys general ask credit card companies to drop plans for gun store code
Two dozen Republican attorneys general are urging Visa, Mastercard and American Express to drop plans to adopt a new merchant category code for gun retailers, saying the move would infringe on consumer privacy. In a letter sent to businesses on Tuesday, attorneys general warn credit card companies that they could face legal action if they go ahead with the code adopted by the International Organization for Standardization. [CNBC]
Can the Visa-Mastercard duopoly be broken?
America is home to the highest interchange fees of any major economy; the costs are an order of magnitude higher than in Europe and China. This largely benefits two companies: Visa and Mastercard, which facilitate more than three-quarters of the country’s credit card transactions. That made them two of the most profitable companies in the world, with net margins last year of 51% and 46% respectively. Rank every company (excluding real estate investment trusts) in the S&P 500 Index by their average net profit margins last year, five years ago and ten years ago, and only four appear in top 20 every time. Two are financial information companies, Intercontinental Exchange and the CME Group. The others are Mastercard and Visa. [The Economist]
Citigroup joins industry efforts to lend to people with no credit score
Citigroup joins government-sponsored effort to expand access to credit in underserved communities. The bank is launching two pilot programs early next year under the Office of the Comptroller of the Currency’s REACh, or Roundtable for Economic Access and Change, project. One program will issue credit cards to people without a credit score, while the other will make it easier for minority, women and veteran-owned small businesses to get credit. [The Wall Street Journal]
The number of BNPL users is expected to increase by 2027
According to a new study from Juniper Research, the number of “buy now, pay later” users will exceed 900 million worldwide by 2027, up from 360 million in 2022. “This substantial growth of 157% will be driven by the anticipated economic downturn, which will increase demand for low-cost credit solutions,” the company said. The report notes that BNPL’s services do not require rigorous credit checks and that an increasing number of merchants accept this form of payment, making it easier for consumers to access than traditional credit. [CU Today]
A Goldman Sachs-backed T-Mobile credit card is coming
T-Mobile, the second largest mobile operator in the United States, plans to launch its own credit card. Although nothing has been announced yet, reports from Bloomberg indicate that Goldman Sachs and T-Mobile have entered into a partnership agreement. This will be Goldman Sachs’ third credit card. It is also the issuer of the popular Apple Card and the My GM Rewards card. For T-Mobile, it’s an opportunity to join the credit card world like rival Verizon did a few years ago. [The Motley Fool]
TD Bank and Target Credit Card Partnership Will Continue Through 2030
Target’s RedCard credit card offerings will continue to be developed by the same team as TD Bank and Target have extended their credit card partnership, which began in 2013, through 2030. With this contract extension, TD Bank will continue to be the exclusive issuer of Target co-branded and private label consumer credit cards. In one of their most recent product innovations, Target and TD Bank have expanded the RedCard Mastercard program and allowed cardholders to earn 2% instant savings on eligible food and gas purchases. and 1% everywhere else plus 5% at Target. Beyond the savings, the partnership allows Target to offer customers other perks like free Target.com shipping on most items, extended return times and exclusive offers. [PYMNTS]
Visa Eyes B2B, remittances for growth
Visa is targeting business-to-business and remittance markets for major growth in the future, Visa Chief Financial Officer Vasant Prabhu said. Prabhu noted that the $20 trillion “cardable B2B portion” is almost as big as the company’s consumer payment business and looks a lot like it, but growing faster. The company is also targeting the $800 billion remittance market, which revolves around migrants sending money to family and friends. The most important geographic regions for this growth are the United States, United Arab Emirates and Saudi Arabia due to the transfer of money from these countries, the CFO said. [Payments Dive]
Majority raises $37.5 million to better meet banking needs of American migrants
Mobile Bank for Migrants Majority has raised $37.5m in a Series B funding round to expand its range of essential services as it continues its growth trajectory to support the nearly 50 million immigrants in the USA. Majority has seen monthly transaction volume among its migrant user base quadruple this year and its revenue has grown 5x over the past year. To join Majority, members pay a monthly fee of $5.99 for an array of immigrant-focused services that include a bank account, debit card, community rebates, free international money transfer and international calls. at discounted price. People can enroll without a social security number or US documents. All they need to register is a government-issued international ID and proof of US residency. [PYMNTS]
Kim Kardashian’s credit card earrings are causing a stir
Ka-ching. Kim Kardashian is no stranger to high bills from Balenciaga, her favorite fashion brand, and may have poked fun at that fact with her choice of accessories on Tuesday. Stepping out in New York to promote Season 2 of Hulu’s “The Kardashians” on “Good Morning America,” the reality star rocked a pair of sought-after and sold-out Balenciaga credit card earrings. [Page Six]
