How Higher Interest Rates Will Affect Americans' Finances
On Wednesday, the Fed's policymakers collectively signaled that they expect to boost their key rate up to seven times this year, raising its benchmark rate to between 1.75% and 2% by year's end. The officials expect four additional hikes in 2023, which would leave their benchmark rate near 3%. Chair Jerome Powell hopes that by making borrowing gradually more expensive, the Fed will succeed in cooling demand for homes, cars and other goods and services, thereby slowing inflation. Credit card interest rates and the costs of an auto loan will also likely move up. Savers may receive somewhat better returns, depending on their bank, while returns on long-term bond funds will likely suffer. [ABC News]
Here's How Banking Will Evolve Amid the 'Death' of Overdraft Fees
Many top U.S. banks have begun eliminating their overdraft fees on checking and savings accounts, a move that J.D. Power says will shift the banking industry toward a more customer-centric strategy. “The decision to move from a punitive, carrot-and-stick approach suggests that retail banks are recognizing that the role they play in their customers’ lives needs to evolve beyond service provider and into more of a hub of financial advice and guidance." [Fox Business]
As Fuel Prices Keep Rising, Is a Gas Credit Card Worth It?
With gasoline prices hitting record highs—the average price as of March 11, 2022, is $4.32 a gallon—is it worth getting a gas-brand credit card to save some money? It certainly sounds tempting. Gas credit cards, such as those offered by Shell or ExxonMobil, typically offer 5 cents to 10 cents off per gallon of gas. So filling up a 15-gallon tank, at an average cost of $64.80, could shave as much as $1.50 off the total. But regular cash-back credit cards could save you even more. A rewards card that pays you 5% on your gasoline purchases could mean a savings of $3.24 on that 15-gallon fill-up, or more than twice as much as the gas card. [Consumer Reports]
5 Credit Cards Trends Experts Are Watching for This Year and Beyond
Experts are predicting continued changes to Americans’ credit card use this year, including how and where we spend, more flexible payment options, and increasing ways to access credit. Balance transfer cards have made a comeback after disappearing during the pandemic, an influx of everyday rewards categories brought increased value to essential purchases like groceries and gas, and novel card options like crypto rewards cards entered the market. There’s a lot more in store for the year ahead. Here’s what experts are predicting for credit cardholders through the rest of 2022 and beyond, and how you can prepare. [Next Advisor]
Credit Card Debt is Up by 30% Over the Past Two Years
A LendingTree survey revealed that 30% of Americans saw an increase in credit card debt over the last two years, driven primarily by inflation and loss of income. In the study, 48% of consumers indicated that inflation led to the increase in credit card debt, while 34% said income loss was the largest driving factor. The study also found that 30% of consumers were able to increase their credit score during the same two-year period. Younger generations and parents suffered more than most: 42% of millennials and 45% of parents with young children had a difficult time making bill payments during the pandemic. While some consumers saw a rise in their credit scores, one in five consumers indicated they haven't checked their scores in two years. [ZD Net]
American Express CEO Says the Shift to Remote Work Made a New Segment of Business Travelers
American Express expects remote workers to create new demand for business travel. CEO Steve Squeri said, “You’re going to have, I believe, a lot more internal travel where colleagues and employees will come into the headquarters to be with their team for a few days. And they may do that multiple times a year. So I think that part of business travel will be a new piece.” [CNBC]
CFPB Urged to Act Quickly on Buy Now Pay Later Loans
The speed at which the buy now, pay later loan industry is evolving could prompt the Consumer Financial Protection Bureau to action once the deadline for receiving consumer comments ends March 25. The CFPB has not indicated when it might make its next move, but the co-author of a sweeping new BNPL industry report from the consumer advocacy organization U.S. PIRG suggests some regulatory guidance for the BNPL sector could come soon as a response to reports of escalating risk to consumers. [American Banker]
Brazilians Are Spending More Than Half Their Income on Debt Payments
Finance professor Claudia Yoshinaga asked her foreign students at the Getulio Vargas Foundation in São Paulo to guess the average interest rate Brazilian credit card issuers charge on unpaid balances. She instructed them to guess high. The correct answer: 346.3%. Brazilians who took on debt during the pandemic are bearing the brunt of the central bank’s campaign to tame stubborn double-digit inflation. Since March 2021, Brazil’s central bank has ratcheted up its benchmark interest rate, called the Selic, a total of 875 basis points. The strong medicine is starting to show results. Consumer prices rose 10.4% in January from a year earlier, an improvement on an 18-year high of almost 11% in November. [Bloomberg]
Big-Name Partnerships Give Mastercard a Leg Up in the BNPL Arms Race
Mastercard added H&R Block, i2c, Walgreens, and other partners to Mastercard Installments, the buy now, pay later program it announced in September. Mastercard Installments lets the card network's merchants offer BNPL options, including pay-in-four interest-free installment plans, through a direct integration into their platforms. Mastercard can rely on its vast reach to scale its BNPL program and drive volume. The card network has 78 million merchants in its acceptance network. The program's simple integration may be a key selling point for merchants since it lets them rely on their existing relationship with Mastercard instead of forging deals with BNPL firms. [Business Insider]
As Visa and Mastercard Ready New Interchange Schedules, Merchants Brace for the Impact
Having held off for the past two years, the country’s two biggest card networks are preparing revisions to their interchange schedules that at least one research firm says will cost U.S. merchants an estimated $475 million in additional transaction fees. The firm’s estimates indicate the changes in Visa’s rates will add up to a net $145 million in additional cost to acquirers. For Mastercard, the impact will net out to $330 million. The networks do not collect interchange. In general, e-commerce merchants can expect the heftiest impact. [Digital Transactions]
Biometrics is Most Popular for Onboarding in Only One Country
Of 14 nations (plus Puerto Rico) surveyed around the world, consumers in only two, Hong Kong and Brazil, prefer to verify their identity with biometrics when they open an online account according to credit-reporting firm TransUnion. And of Hong Kong and Brazil, only the South American giant seems thoroughly convinced about biometrics for onboarding. Everyone else felt safe with multifactor authentication. The message of the report is that businesses have to optimally balance tough authentication with acceptable customer experience. [Biometric Update]
Ukraine Legalizes Crypto Sector as Digital Currency Donations Continue to Pour In
Ukraine has passed a law that creates a legal framework for the cryptocurrency industry in the country. The bill, which was adopted by Ukraine’s parliament last month and signed into law by President Volodymyr Zelenskyy on Wednesday, will allow foreign and Ukrainian cryptocurrencies exchanges to operate legally, according to the country’s Ministry of Digital Transformation. Banks will be allowed to open accounts for crypto companies. [CNBC]
