Inflation Is Forcing 26% of Americans to Stop Paying Off Debts
Given the way inflation has been wreaking havoc on consumers since mid-2021, it’s easy to see why some people may have racked up debt over the past year. Or, it could be that you had debt before inflation took hold, and that you’re still carrying a loan or credit card balance. The sooner you pay off your debt, the less money you’re apt to spend on interest. Plus, paying off credit card debt in particular could work wonders for your credit score. But in a recent Morgan Stanley report, 26% of Americans say they’re scaling back on paying down debt due to inflation. And that’s a move you might regret. [The Motley Fool]
Cryptocurrency’s popularity with American investors is on a steep decline.
Only About 30% of Millennials Are Comfortable Investing in Crypto, Down From about 50% in 2021
Cryptocurrency’s popularity with American investors is on the decline. In 2022, only about 21% of Americans feel comfortable investing in cryptocurrency, according to Bankrate’s September survey. That’s down from 35% in 2021. Although comfort levels dropped with investors across generational lines, the decrease was steepest among millennials. Nearly 30% of American investors between the ages of 26 and 41 feel comfortable in 2022, compared to nearly 50% in 2021. The decline is unsurprising, considering nearly $2 trillion has been wiped off the entire crypto market since November 2021. [CNBC]
In a Payments Industry First, Usage of Debit Cards Tops That of Credit Cards
Consumers’ usage of debit cards has finally surpassed that of credit cards. Through the second quarter of 2022, 56.2% of consumers preferred debit as their primary payment card, compared to 39.5% for credit, according to a report from S&P Global Market Intelligence. Those numbers represent a dramatic change in the payments landscape, as just 40.2% of consumers cited debit as their primary payment card as recently as last year, compared to 54.6% for credit. The reasons for the overwhelming shift are varied. On a broad scale, they include lower or no fees for debit card use, faster settlement, the additional security feature of a PIN for card-present transactions, and no interest charges. Another factor is that consumers view debit as a way to prevent overspending and better manage their finances. [Digital Transactions]
46% of Americans Continue to Make This Expensive Credit Card Mistake
One of the biggest credit card misconceptions is that carrying a balance month to month will give your credit score a boost. To that point, 46% of Americans incorrectly believe that leaving a small balance on their card is better for their credit score than paying off the balance each month, a recent NerdWallet study found. That’s an expensive mistake. In fact, any amount of revolving debt costs you in interest charges. Those typically are not calculated based on how much debt you roll over to the next statement period, but rather on your daily average balance. Carrying a balance could also ding your credit score. [CNBC]
The Durbin Amendment Will Imperil Security and Innovation in the Credit Card Market
One of those amendments likely to be considered is Senator Richard Durbin’s Credit Card Competition Act, which would effectively prohibit consumers, payment networks, and financial institutions from determining how their credit card transactions get routed. If mega merchants can route their cards through a less expensive network, then interchange fees will go down, and Senator Durbin’s amendment assumes that if this occurs then consumers will see lower prices. However, there are no free lunches in a market to be had with such a regulatory intervention: Interchange pays for credit card rewards, the extension of credit, and the cost of protecting small businesses and consumers from fraud. Reducing interchange would cause credit card rewards programs to wither and more people would likely have trouble obtaining credit cards altogether. [Forbes]
Fed Says Debit Cards Must Connect to Multiple Networks, Even Online
Debit card issuers have nine months to ensure all transactions made with their cards, including card-not-present payments, can be processed by at least two unaffiliated networks. The same ban on exclusivity has long applied to in-person debit card transactions under Regulation II. The Federal Reserve Board finalized a rule Monday that applies to all other debit transactions, including e-commerce payments. Part of the Dodd-Frank Act, Regulation II governs debit card interchange fees and routing. The rule was meant to give merchants a way to control their expenses by offering shoppers a way to pick a low-cost routing option when making a purchase. Card issuers and networks argue that their costs are fair and necessary to support innovation and fraud detection for card payments. [American Banker]
How Did the Pandemic Change the Way Consumers Make Major Purchases?
While there is plenty of anecdotal evidence showing how the pandemic changed the way consumers shop, Synchrony quantified it, noting that 76% of consumers polled use their mobile device for shopping (up from 48% in 2019) while total online purchases jumped to 26% from 16% two years ago; and 25% completed major purchases online in 2021, compared with16% in 2019. And as consumers do more of their shopping online, they’re also doing more research in all aspects, including financing choices. [Furniture Today]
Mastercard Pushes Deeper into Crypto with New Tool for Combating Fraud
Mastercard will debut a new piece of software that helps banks identify and cut off transactions from fraud-prone crypto exchanges. Called Crypto Secure, the system uses “sophisticated” artificial intelligence algorithms to determine the risk of crime associated with crypto exchanges on the Mastercard payment network. The system relies on data from the blockchain, a public record of crypto transactions, as well as other sources. The service is powered by CipherTrace, a blockchain security startup Mastercard acquired last year. CipherTrace helps businesses and government agencies investigate illicit transactions involving cryptocurrencies. Mastercard is launching the service against a backdrop of growing crime in the nascent digital asset market. The amount of crypto entering wallets with known criminal connections surged to a record $14 billion last year. [CNBC]
Buy Now/Pay Later Fintech Afterpay Debuts Interest-Bearing Loans
Afterpay is no longer just a “Pay in 4” buy now/pay later lender. The fintech, a unit of Block, is adding a monthly payment option at the point of sale so users may opt to stretch payments out for specific items for up to a year. The new product enables users to borrow $400 to $4,000, double the maximum available with Afterpay’s core interest-free loans that users typically repay over six weeks. [American Banker]
Dave Ramsey Says Life Is Better Without Credit Cards but Here Are 5 Reasons Why It’s Actually Worse
Finance expert Dave Ramsey does not believe you should have any credit cards. In fact, he has said, “Plain and simple: Life is better without credit cards,” and advised that his recommended number of cards is zero. Unfortunately, Ramsey is unequivocally wrong on this. Life is not better without credit cards. It is demonstrably worse for five very important reasons. You won’t earn rewards for everyday purchases. It will be harder to build credit. You’ll miss out on valuable cardholder benefits. You could end up facing more financial loss due to theft. It will be much harder to rent a car or book a hotel. [The Motley Fool]
Rethinking Commercial Credit Cards in a High Inflation Environment
The United States, and much of the world, is facing an inflationary environment not seen in more than 40 years. Persistent, high inflation is proving to be stubborn and shows no sign of slowing down. This greatly affects businesses buying goods and services because it increases their prices and makes running their business more costly. On the supplier side, any delay in receiving payment for a product from a business means that money is worth less when they receive it than when they submitted an invoice. The typical method of paper check in business-to-business payments is less effective for all parties involved during times of inflation. These reasons are why commercial credit card payments are rising in popularity. [Payments Journal]
USPS Workers Arrested in $1.3 Million Credit Card Fraud, Identity Theft Scheme
The Justice Department said that three U.S. Postal Service workers were arrested last week in connection with the theft and unauthorized use of credit cards resulting in the loss of more than $1.3 million. According to a release from the DOJ, individuals allegedly worked with USPS mail carriers to steal credit cards from the mail before they were delivered to the assigned customers starting between, in or around 2018. The individuals are accused of using the stolen credit cards at high-end retailers and selling some of the merchandise that was purchased on LuxurySnob.com. [Fox Business]
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