Consumers Grow Unhappy with Credit Card Perks as They Spend at Record Levels
Credit card rewards top the list of what consumers are the least satisfied with, according to the J.D. Power 2023 U.S. Credit Card Satisfaction report. The dissatisfaction stems from the rewards earned per dollar spent, especially among cashback cardholders. Cardholders paying $500 or more in annual fees said they were less happy with the rewards and benefits offered by their credit cards because of the unreasonable fees they paid, the report said. For example, airline cardholders said they were highly satisfied with rewards and benefits but were less impressed with their card terms. Additionally, the search for better rewards programs was the primary reason why consumers switched card providers in the last twelve months. [Fox Business]
Cracks Are Starting to Appear in Consumer Spending, Warns Citigroup CEO Jane Fraser. And the Worst May Be Yet to Come
Economists have been wondering when U.S. consumers would run out of steam once and for all—according to Citigroup CEO Jane Fraser, the time is nigh. Experts have been shocked by the resilience of shoppers, who have continued to spend despite their wallets being pushed to the “point of pain” as the Fed hikes rates to their highest figures in more than two decades. But whether it was ‘YOLO (you only live once) spenders’ propping up the economy, or people splashing the last of their pandemic cash, it seems the war chests have at last run dry. With Christmas around the corner it seems consumers are at last scaling their spending back. Citigroup’s CEO Jane Fraser said “cracks” in consumer spending are most notable among those on the lower end of the ladder. [Fortune]
Credit Card Losses Are Rising at the Fastest Pace Since the Great Financial Crisis
Credit card companies are racking up losses at the fastest pace in almost 30 years, outside of the Great Financial Crisis, according to Goldman Sachs. Credit card losses bottomed in September 2021, and while initial increases were likely reversals from stimulus, they have been rapidly rising since the first quarter of 2022. Since that time, it’s an increasing rate of losses only seen in recent history during the recession of 2008. It is far from over, the firm predicts. Losses currently stand at 3.63%, up 1.5 percentage points from the bottom, and Goldman sees them rising another 1.3 percentage points to 4.93%. [CNBC]
Supreme Court Takes the Case Against Credit Card Swipe Fees
The U.S. Supreme Court agreed Friday, Sept. 29, to take up a lawsuit seeking to have the Federal Reserve lower its 12-year-old cap on swipe fees that banks charge merchants to process debit card transactions. The justices accepted the case after appellate courts disagreed on whether the 2021 case was brought too late. The National Retail Federation, which has been advocating for action against the constantly rising swipe fees, welcomed the decision. [Gifts & Decorative Accessories]
Is This the Number 1 Biggest Risk for Both Visa and Mastercard?
If retailers, who are typically already operating on razor-thin margins, could find ways to reduce payments-related expenses, they probably would. One such retailer that highlights a possible threat to Visa and Mastercard is Target. The business has a RedCard debit card that allows shoppers to save 5% on any purchase in-store or online every day. This offering is unique because it pulls money directly from a customer’s checking account; there’s no need to use Visa’s or Mastercard’s rails anytime the card is used. In fiscal 2022 (ended Jan. 28), 20% of Target’s $108 billion of overall revenue came from the RedCard program, which includes credit card products as well. The company doesn’t report how much is from just the debit card, but that’s not an insignificant sum. If 2% of these RedCard sales avoid going to interchange fees, Target could’ve saved $432 million in 2022, a figure that should mainly flow to the bottom line. [The Motley Fool]
Citi Launches BNPL Option for Costco Anywhere Visa Cardholders
Citi announced that Costco Anywhere Visa cardmembers can now access its buy now, pay later option, Citi Flex Pay, to pay for purchases. The option allows cardholders can pay over time with a fixed fee, no interest and the ability to earn cash back rewards. In addition, in an exclusive benefit available to Costco Anywhere Visa cardmembers, they can pay no fees or interest when selecting a three-month Citi Flex Pay payment plan on eligible purchases made in-warehouse or on Costco.com, the announcement said. The benefit will also be made available to Costco Anywhere Visa Business cardmembers in the coming months. [PYMNTS]
The One Thing Warren Buffett Loves About Credit Cards
Buffett has made tons of money by investing in credit card issuers over the years. American Express, of which Berkshire Hathaway owns more than 20%, is one of Buffett’s largest and most successful investments ever. Berkshire (through Buffett) has also invested heavily in Bank of America, which is the conglomerate’s second-largest investment. In addition, Berkshire has substantial investments in Ally Financial, Citigroup, and Capital One, as well as in both major credit card processing networks Visa and Mastercard. [The Motley Fool]
Experian Launches Credit-Building Digital Checking Account and Debit Card
Experian has launched the Experian Smart Money Digital Checking Account and Debit Card, featuring FICO score-boosting Experian Boost. The new offering aims to provide consumers with a way to build credit without accumulating debt. By integrating Experian Boost with the Experian Smart Money Digital Checking Account, Experian aims to provide a streamlined financial experience for consumers looking to bolster their credit strength and overall financial health. The offering is particularly beneficial for consumers who are new to credit or looking to improve their credit profile. [PYMNTS]
Supreme Court Skeptical of CFPB Case, Which Could Add ‘Chaos’ to US Economy
The Supreme Court signaled Tuesday that it is skeptical of an effort by the payday lending industry to undermine the CFPB, a contentious agency created in the wake of the housing market collapse more than a decade ago that has been the target of conservatives ever since. In a case that could have sweeping implications for the mortgage industry and the wider U.S. economy, trade groups representing payday lenders are challenging the way Congress funded the bureau. Instead of subjecting it to annual budget fights on Capitol Hill like most of the federal government, the CFPB is funded through the Federal Reserve, an effort to shield it from political pressure. The Supreme Court’s decision, expected next year, could have an impact on any American who holds a car loan, a mortgage or a credit card. [USA Today]
PayPal and Venmo’s Debit and Credit Cards Come to Apple Wallet
Long gone are the days when you needed to swipe a physical credit card, with your phone typically being all you need to complete in-person transactions. PayPal is finally getting on board with the change, announcing that you can now add it and Venmo’s credit and debit cards to your Apple Wallet. As part of their motivation for the expansion, the company cites a 2022 Morning Consult survey that found 42% of people in the United States have used a mobile wallet. [Engadget]
Sooner Or Later, Regulators Will Focus on Buy Now, Pay Later
Clearly, BNPL meets a consumer need. But it also delivers for retailers, hence the rapid growth. There are three main reasons for this. First, consumers paying with BNPL were up to three times more likely to purchase after browsing. Secondly, while the most common purchases are clothing and shoes, purchases of electronics, appliances, and other durable goods also raised the average basket size. Finally, there were fewer abandoned transactions (two-thirds of US users said they would abandon a purchase if BNPL wasn’t an option). So consumers like it and retailers like it. So why are there concerns? [Forbes]
American Express Is Bringing Back Member Week
Member Week is an annual showcase for American Express to demonstrate the perks and benefits that members enjoy on its cards. The event debuted in 2021 and continues to evolve in terms of the offers and unique experiences provided to members. Access to Member Week is reserved for American Express personal, business and corporate card holders. However, this year American Express has created a Member Week Pass, which allows potential customers a chance to sample the services that come with an Amex membership. The pass includes access to some special events during Member Week. [The Points Guy]
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