New Report Reveals How Consumers Have Changed Their Behavior Due to Inflation and the Economy
People of all income levels, including the wealthy, are trying to stretch their dollars amid the current economic downturn. Nearly three out of four adults are “trading down,” meaning trying to reduce spending in areas such as groceries, according to a new survey of 4,000 people by consulting firm McKinsey. Sixty percent of respondents said they’ve reduced the amount of stuff they buy while 44% have delayed a purchase. And 37% have switched to shopping at cheaper retailers or are more likely to seek discounts. [Fortune]
Record-setting inflation has caused consumers to try to stretch their dollars
Buy Now Pay Later is Eating into Credit Card Usage, J.D. Power Finds
Consumers are spending significantly less on their primary credit cards, says J.D. Power’s 2022 U.S. Credit Card Satisfaction Study. Overall, credit card holders are allotting 42% of their monthly spending to their primary credit cards, down from 47% in 2021 and 2020, and down from 50% from 2019. That decline comes in spite of a year-over-year rise of five points, to 810, in J.D. Power’s consumer-satisfaction score for credit cards. Improvements by card issuers in service, more favorable credit card terms, and mobile and communication factors/subfactors are key reasons for the increase in satisfaction. One culprit for the decrease in card spending is buy now, pay later loans, which offer consumers an alternative, and more flexible, financing method for purchases than credit cards. [Digital Transactions]
More Americans Are Relying on Credit Cards. That Could Be Very Costly
More than 175 million Americans have at least one credit card and about half of active accounts carry a balance, according to the CFPB. Credit card interest rates have increased despite a stable share of riskier subprime cardholders, historically low prime rates and falling charge-off rates, a measure of accounts considered uncollectable after extreme delinquency. The prime rate is the interest rate banks charge their strongest corporate clients and it serves as a benchmark for consumer loans. The CFPB found that last year, the spread between the prime rate and the average annual percentage rate on credit cards was at record highs, even as actual delinquencies and defaults tumbled to record lows. [CNN]
Household Debt Surges Past $16 Trillion in 2nd Quarter
Household debt grew in the second quarter of this year as a result of consumers taking out more loans across several markets, according to the Federal Reserve Bank of New York. Household debt increased by 2%, or $312 billion, in the second quarter, bringing the total to $16.15 trillion, the bank said in its Quarterly Report on Household Debt and Credit. [Fox Business]
70% of Americans Have Free Money They’re Not Using
On the surface, Americans seem to love their rewards credit cards. After all, 87% of all U.S. credit cardholders have at least one piece of plastic that enables them to earn travel, cash back, and other credit card-related rewards. But most Americans aren’t using the card rewards perks they’ve earned. That’s the takeaway from a new Lending Tree study that shows a staggering 70% of all U.S. rewards credit cardholders have unused cash back rewards, points, or miles. Of that group, the majority (49%) have unused cash back rewards, while 13% have unused airline miles and 11% unused fuel points. That’s not all. The report also notes that 40% of rewards credit cardholders haven’t cashed in on any rewards in the past year. [The Street]
One of the Best No-Annual-Fee Cash Back Cards is Now Offering a $200 Welcome Bonus
Citi has announced a new welcome offer for its Citi Double Cash Card that would allow new cardholders to earn $200 after meeting the minimum spending requirement of $1,500 over the first six months. The Citi Double Dash Card is a great product since it offers 2% cash back for purchases: that’s 1% cash back for all eligible purchases, plus an additional 1% cash back after you pay your credit card bill. You won’t need to track any specific spending categories as you would with other cards. [CNBC]
Amex Platinum Cardholders Will Soon Get Access to a Free Paramount+ Subscription, Thanks to the Card’s Complimentary Walmart+ Membership
The Platinum Card from American Express has added a ton of new benefits in the past year or so, many of which may seem a little niche or unusual for a premium card. One of these is a complimentary Walmart+ subscription; cardholders receive a statement credit for the membership fee each month when they charge it to their card. Walmart+ is actually pretty useful and can save you money with perks like free grocery delivery and discounts on gas. And now there’s an additional benefit coming to the service: starting in September, Walmart+ members will get access to a free Paramount+ Essential streaming subscription. [Business Insider]
Bank of America Sweetens Card Rewards with One-Year Grubhub+ Membership
Bank of America is offering eligible BofA cardholders a year of a Grubhub+ membership for free, another example of banks sweetening their rewards programs to lure cardholders. Starting August 18, eligible cardholders can activate a one-year complimentary Grubhub+ membership trial, valued at almost $120. The offer provides $0 delivery fees on orders of $12 or more and exclusive perks from restaurants on Grubhub. [Seeking Alpha]
Capital One $190 Million Data Breach Settlement: Are You Eligible for a Payment?
Capital One’s infamous 2019 data breach exposed the personal information of more than 100 million people and resulted in a class-action lawsuit that’s been tentatively settled to the tune of $190 million. Plaintiffs in the case claim a hacker never would have been able to break into Capital One’s cloud computing systems, which were hosted on Amazon Web Services, if the company had taken adequate cybersecurity measures. In their complaint, they allege Capital One “knew of the particular security vulnerabilities that permitted the data breach, but still failed” to protect customers, putting millions at risk for fraud and identity theft. [CNet]
Wait, When Did Everyone Start Using Apple Pay?
It took longer than expected for the iPhone to become a wallet. But the patience of Apple is slowly paying off. Nothing broke on the day in 2014 when Apple presented a new service called Apple Pay. If the quality of destruction was measured by the speed at which it happened, the flashy innovation from an industry titan would have been considered a disappointment. The idea that it would make the wallet obsolete sounded ridiculous when the pace of Apple Pay adoption underperformed expectations. Wall Street analysts and iPhone users alike were skeptical for the next few years. The experience of using a credit card didn’t seem like a problem that required a solution from Apple. [The Wall Street Journal]
Mastercard Faces Retailer Backlash Over Installment Payments
Mastercard is facing pushback from retailers over a new product that allows customers to pay off their purchases in installments. The payments giant has begun telling merchants and their banks that it will charge retailers 3% of a purchase price each time a consumer opts to use the new program, according to people familiar with the matter. Retailers will be automatically enrolled for Mastercard’s new buy-now, pay-later service, though they will have a chance to opt out. [Bloomberg]
American Express to Offer Fintechs Credit Cards via WebBank
WebBank, which already helps fintechs launch credit and debit cards on the Visa and Mastercard networks, now has a third option after adding the American Express network and its proprietary card benefits to its menu. WebBank plans to begin issuing Amex credit cards through fintechs later this year with the option to include loyalty points and card offers. WebBank is building momentum in the fintech arena following its launch of buy now/pay later fintech Klarna’s Visa-branded debit card in June and the Mastercard-branded Gemini Crypto Rewards credit card in April. [American Banker]
How Much Should Credit Card Processing Fees Be? A New Bill Says Not So High
For years, merchants have battled banks and payment processors over credit card processing fees. That fight has risen to a fever pitch now that a bipartisan bill to curb those fees is on the table. Retailers say consumers will benefit from passed-on savings, but opponents say that’s not likely. [USA Today]
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