The Hidden Costs of Clicking the “Buy Now, Pay Later” Button
The researchers then teased out those consumers who were frequent shoppers at retailers that partnered with BNPL providers. They found that being offered BNPL by a favorite retailer powerfully predicts a shopper’s willingness to use it and that these users had an 8.9% increase in overdraft charges, a 2.5% increase in credit card interest, and an 8.4% increase in late fees. This adds up to $176 per year in extra charges for the average user and up to $252 per year for especially vulnerable users. [Stanford Business School]
Those hidden gotchas when using Buy Now, Pay Later as the way to pay
Average Credit Card Balances Jump 10% to a Record $6,360 as More Consumers Fall Behind on Payments
Credit card debt has notched another new high. Americans now owe $1.08 trillion on their credit cards, the Federal Reserve Bank of New York reported Tuesday. Balances jumped 10% from a year ago, according to a separate quarterly credit industry insights report from TransUnion, with the average balance per consumer hitting $6,360, also a historic record. Households continue to show signs of strain — more cardholders are carrying debt from month to month or falling behind on payments. Credit card delinquency rates jumped across the board, the New York Fed and TransUnion found. Credit card delinquencies surged more than 50% in 2023, the New York Fed reported. According to TransUnion’s research, “serious delinquencies,” or those 90 days or more past due, reached the highest level since 2009. [CNBC]
Credit Cards Could Swipe Department Stores’ Profits
Department stores haven’t had an easy life lately, but store credit cards lightened the load. Now, that part of their business faces a new threat. There are two developments worth watching: First is a proposed rule by the Consumer Financial Protection Bureau to cut the late fees that credit cards can charge consumers from as much as $41 per missed payment ($30 on the first missed payment) to $8. The agency is expected to issue a final ruling in the coming months, though legal challenges could end up impacting the timing and severity of the cuts. Second, delinquencies, which have already hit Macy’s could soon impact other department stores. Credit cards are surprisingly important to department stores. While they account for a small piece of their top lines, they boost profits. Credit income accounted for about 49% and 44% of Macy’s and Nordstrom’s operating income in 2022. [The Wall Street Journal]
Some Americans Have Become Saddled with Credit Card Debt as Rent and Everyday Prices Remain High
While the U.S. economy is broadly healthy, pockets of Americans have run through their savings and run up their credit card balances after battling inflation for more than two years. Experts worry that members of these groups, mostly lower- and middle-income Americans who tend to be renters, are falling behind on their debts and could face further deterioration of their financial health in the year ahead, particularly those who have recently resumed paying off student loans. [Associated Press]
Fed on Track to Cut Rates This Year with Inflation Slowing and the Economy Healthy, Powell Says
Chair Jerome Powell said the Federal Reserve remains on track to cut interest rates three times this year, a move that’s expected to begin as early as May. Powell also said the nation’s job market and economy are strong, with no sign of a recession on the horizon. Powell’s comments largely echoed remarks he gave at a news conference Wednesday, after the Fed decided to keep its key interest rate steady at about 5.4%, a 22-year high. To fight inflation, the Fed raised its benchmark rate 11 times beginning in March 2022, causing loans for consumers and businesses to become much more expensive. [Associated Press]
NYC Under Scrutiny for Releasing Migrants Without Bail, Migrant Debit Cards
Manhattan’s district attorney is being criticized by fellow state Democrats over migrants released without bail after attacking police officers. New York City is also getting national attention for giving migrant families debit cards with a monthly allowance. [Straight Arrow News]
Consumer Group Wants to End $255 Million Gift Card Loophole for Starbucks and Others
When you get a Starbucks gift card, or keep reloading one on your phone, you often end up with awkward amounts that can be difficult to spend. For most people, the remainders are a few bucks of wasted potential caffeine and sugar. For Starbucks, they are worth hundreds of millions of dollars each year, according to a consumer advocacy group in Washington state that wants to end the “Gift Card Loophole.” Changes in the coffee giant’s home state could affect gift and loyalty cards nationwide. The Washington Consumer Protection Coalition is pushing state legislators to remove a provision dating back to 2004. While that 2004 legislation was relatively consumer-friendly for its time by barring gift cards from fully expiring and eliminating maintenance fees, it allowed funds left on cards, or now on mobile apps, to be claimed as revenue by companies. [Ars Technica]
Major Delta Amex Card Changes: New Statement Credits, Welcome Bonuses and Higher Annual Fees
As of February 1, 2024, big changes are in effect for Delta SkyMiles American Express cards. Annual fees increased almost across the board, but the additional cost can be more than offset by new statement credits. Business Delta cards also got new bonus spending categories, while premium cards got upgrades to their Companion Certificates and a built-in elite status boost. To top it off, the revamped credit cards are offering new cardholders elevated welcome bonuses for a limited time. [CNBC]
7 Key Benefits of Mobile Banking
Mobile banking has become the norm in many consumers’ daily lives. A report from the American Bankers’ Association found that 81% of consumers had managed their bank account from a mobile device at least once in the past month. The allure, of course, is the convenience mobile banking offers: Consumers tote their smartphones virtually everywhere, so a mobile banking app can help them quickly take care of a range of financial needs whenever they wish. It’s essentially a bank in your pocket. Here are the seven advantages of mobile banking. [Bankrate]
Cryptomining Energy Consumption Goes Under Investigation in U.S.
The US Energy Information Administration (EIA) has launched a survey on the electricity consumption of cryptocurrency mining in the country. Based on a combination of data from the Cambridge Bitcoin Electricity Consumption Index, one of the main monitoring databases, and data that could be garnered on cryptocurrency facilities in the US, the EIA has made a preliminary estimate that the annual electricity consumption of cryptocurrency mining is between 0.6% to 2.3% of that of the country as a whole. [Smart Energy International]
