America’s reliance on credit cards is growing. Fed rate hike will make it more painful
As prices continue to rise, Americans are increasingly dependent on credit cards to make purchases. And now, with the Federal Reserve’s latest three-quarter percentage point hike, many of them will pay more for the debt they’ve built up. At just over 18%, the average annual rate on new credit cards is within a percentage point of the all-time high of 19% set in July 1991. TransUnion discovered that there are more credit cards these days and there are more blame on those cards. TransUnion said 161.6 million people in the US — about half of the total population — had access to a credit card in the second quarter a jump from 153.3 million a year earlier. Over the same time frame, 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 leaning toward credit card rewards to help offset the rising cost of everyday purchases due to inflation concerns. A Wells Fargo survey found that 92% of Americans are concerned about rising inflation, and nearly half of cardholders have used these earned benefits to offset the price of some everyday expenses. Nearly three-quarters (71%) of Americans said they have rewards cards, and 45% of rewards cardholders said their credit card use increased during the pandemic. In addition, two-thirds of rewards card holders (65%) said they care about credit card rewards now more than ever. [Fox Business]
House Legislators Add Credit Card Competition Bill
An accompanying bill targeting Visa and Mastercard dominance was introduced in the House Monday by Representatives Peter Welch (D-VT) and Lance Gooden (R-TX), after the Senate’s version of such legislation 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 credit transactions must be routed, at least one of which is a network other than Visa or Mastercard. That could be smaller rivals like NYCE or Shazam, or other major credit card companies like American Express or Discover Financial Services. [Payments Dive]
GOP Attorneys General Call on Credit Card Companies to Drop Gun Shop Code Plans
Two dozen Republican attorneys general are urging Visa, Mastercard and American Express to drop their plans to introduce a new category code for arms dealers, saying the move would violate consumer privacy. In a letter sent to the companies on Tuesday, the attorneys general warned credit card companies that they could face legal action if they continue 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 greater than in Europe and China. That largely benefits two companies: Visa and Mastercard, which power more than three-quarters of the country’s credit card transactions. This has 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 mutual funds) in the S&P 500 index based on their average net profit margins from last year, five years ago, and ten years ago, and only four appear in the top 20 each time. Two are financial information firms, Intercontinental Exchange and the CME Group. The others are Mastercard and Visa. [The Economist]
Citigroup Joins Industry Efforts To Provide Loans To Those With No Credit Score
Citigroup joins a government-sponsored effort to expand access to credit in underserved communities. The bank will launch two pilot programs early next year under the Office of the Comptroller of the Currency’s Project REACh, or Roundtable for Economic Access and Change. One program will issue credit cards to those with no credit scores, while the other will make it easier for small businesses owned by minorities, women, and veterans to get credit. [The Wall Street Journal]
Number of BNPL users expected to increase by 2027
According to a new study from Juniper Research, the number of users who buy now, pay later will exceed 900 million globally in 2027, up from 360 million in 2022. “This substantial 157% growth will be driven by the projected economic downturn, pushing demand to low-cost credit solutions will increase,” the company said. The report noted that BNPL services do not require hard credit checks and an increasing number of merchants are accepting this payment method, making it more accessible to consumers than traditional credit. [CU Today]
A Goldman Sachs Backed T-Mobile Credit Card Is Coming
T-Mobile, the second-largest cellular carrier in the United States, plans to launch its own credit card. While nothing has been announced yet, reports from Bloomberg indicate that Goldman Sachs and T-Mobile have reached a partnership agreement. This will be Goldman Sachs’ third credit card. It is also the card 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, as rival Verizon did a few years ago. [The Motley Fool]
TD Bank, Target Credit Card Partnership to continue until 2030
Target’s RedCard credit card offerings continue to be developed by the same team as TD Bank and Target extended their credit card partnership, which began in 2013, to 2030. With this contract extension, TD Bank will remain the exclusive issuer of Target’s 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 enabled cardholders to instantly save 2% on eligible dinner and gas purchases and 1% everywhere else, in addition to 5% at Target. In addition to the savings, the partnership allows Target to offer its customers other benefits, such as free Target.com shipping on most items, extended return times, and exclusive offers. [PYMNTS]
Visa Eyes B2B Remittances for Growth
Visa is targeting the business-to-business and remittance markets for major growth in the future, said Vasant Prabhu, Visa’s chief financial officer. Prabhu noted that the $20 trillion “cardable B2B portion” is nearly as big as the company’s consumer payments business and is much like it, but growing faster. The company is also targeting the $800 billion remittance market, which revolves around migrants sending money across borders to family and friends. The largest geographic regions for that growth are in the US, the United Arab Emirates and Saudi Arabia because of money coming from those countries, the CFO said. [Payments Dive]
Majority raises $37.5 million to further fulfill US migrant banking needs
Mobile Bank for Migrants Majority has raised $37.5 million 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 United States. The majority have seen the monthly transaction volume among migrant users quadruple this year and revenues have increased fivefold in the past year. To join Majority, members pay a $5.99 monthly fee for a cross-section of immigrant-focused services, including bank account, debit card, community discounts, free international wire transfers, and discounted international calls. People can sign up without a Social Security number or US documentation. All they need to register for membership is an international government-issued ID and proof of residency in the US. [PYMNTS]
Kim Kardashian’s credit card calls cause a stir
Ka-ching. Kim Kardashian is no stranger to racking up bills at Balenciaga, her favorite fashion brand, and may have poked fun at her choice of accessories on Tuesday. When he went to New York to promote season 2 of Hulu’s “The Kardashians” on “Good Morning America,” the reality star rocked a pair of Balenciaga’s sold-out, sought-after credit card earrings. [Page Six]
