Inflation forces 26% of Americans to stop paying off debt
Given the way inflation has been wreaking havoc on consumers since mid-2021, it’s easy to see why some people have built up debt over the past year. Or it could be that you were in debt before inflation hit and you still have a loan or credit card balance. The sooner you pay off your debt, the less money you can spend on interest. Plus, pay off credit card debt in particular could do wonders for your credit score. But in a recent Morgan Stanley report, 26% of Americans say they are deleveraging because of inflation. And that’s a move you might regret. [The Motley Fool]
The popularity of cryptocurrencies among American investors is declining sharply.
Only about 30% of millennials are comfortable investing in crypto, down from about 50% in 2021
The popularity of cryptocurrencies among American investors is declining. By 2022, only about 21% of Americans will feel comfortable investing in cryptocurrency, according to Bankrate’s September survey. That’s less than 35% in 2021. While comfort levels declined among investors across generations, the decline was strongest among millennials. Nearly 30% of US investors between the ages of 26 and 41 feel comfortable in 2022, compared to nearly 50% in 2021. The drop isn’t surprising given that nearly $2 trillion has been wiped out of the entire crypto market since November 2021. [CNBC]
In a payments industry, the use of debit cards takes precedence over credit cards
The use of debit cards by consumers has finally surpassed that of credit cards. Through the second quarter of 2022, 56.2% of consumers preferred debit as their primary payment card, compared to 39.5% for credit, according to a report by S&P Global Market Intelligence. Those numbers represent a dramatic change in the payments landscape, as only 40.2% of consumers named debit as their primary payment card last year, compared to 54.6% for credit. The reasons for the overwhelming shift are diverse. Broadly, they include lower or no charge for using the debit card, faster settlement, the added security feature of a PIN for card transactions, and no interest charges. Another factor is that consumers view debit as a way to avoid overspending and better manage their finances. [Digital Transactions]
46% of Americans continue to make this expensive credit card mistake
One of the biggest misconceptions about credit cards is that carrying a balance from month to month will boost your credit score. Until then, 46% of Americans mistakenly believe that having a small balance on their card is better for their credit score than paying off the balance every month, according to a recent survey by NerdWallet. That’s an expensive mistake. In fact, any amount of revolving debt will cost you interest charges. Those aren’t usually calculated based on how much debt you carry over to the next statement period, but rather on your daily average balance. Carrying a balance can also affect your credit score. [CNBC]
The Durbin amendment will jeopardize security and innovation in the credit card market
One of those changes likely to be considered is Senator Richard Durbin’s Credit Card Competition Act, which would effectively prohibit consumers, payment networks and financial institutions from controlling how their credit card transactions are routed. If mega merchants can route their cards through a cheaper network, interchange fees will drop, and Senator Durbin’s amendment assumes that if this happens, consumers will see lower prices. However, there are no free lunches in a market with such regulatory intervention: Interchange pays for credit card rewards, credit renewals, and fees to protect small businesses and consumers from fraud. Reducing the exchange would cause credit card reward programs to wither and more people would probably struggle to get credit cards at all. [Forbes]
Fed says debit cards should connect to multiple networks, even online
Debit card issuers have nine months to ensure that all transactions made with their cards, including payments that are not present, can be processed by at least two unaffiliated networks. The same ban on exclusivity has long applied to personal debit card transactions under Regulation II. The Federal Reserve Board on Monday enacted a rule that applies to all other debit transactions, including e-commerce payments. As part of the Dodd-Frank Act, Regulation II regulates the interchange fees and routing of debit cards. The rule was intended to give merchants a way to control their spending by providing shoppers with a way to choose a low-cost route option when making a purchase. Card issuers and networks state that their charges are reasonable and necessary to support innovation and fraud detection for card payments. [American Banker]
How has the pandemic changed the way consumers make large purchases?
While there’s plenty of anecdotal evidence showing how the pandemic has changed the way consumers shop, Synchrony quantifies it, noting that 76% of consumers surveyed use their mobile device to shop (up from 48% in 2019), while total online purchases increased to 26% from 16% two years ago; and 25% made major purchases online in 2021, compared to 16% in 2019. And as consumers shop more online, they also do more research on all aspects, including financing choices. [Furniture Today]
Mastercard pushes deeper into crypto with new anti-fraud tool
Mastercard is introducing a new piece of software that allows banks to identify and cut off transactions from fraud-prone crypto exchanges. The system, called Crypto Secure, uses “advanced” artificial intelligence algorithms to determine the risk of crime associated with crypto exchanges on the Mastercard payment network. The system relies on data from the blockchain, a public record of crypto transactions, and other sources. The service is powered by CipherTrace, a blockchain security startup that Mastercard acquired last year. CipherTrace helps companies and government agencies investigate illegal transactions with cryptocurrencies. Mastercard is launching the service against a backdrop of growing crime in the burgeoning digital asset market. The amount of crypto entering wallets with known criminal connections soared to a record $14 billion last year. [CNBC]
Buy now/pay later Fintech Afterpay introduces interest-bearing loans
Afterpay is no longer just a “Pay in 4” buy now/pay later lender. The fintech, a unit of Block, is adding a monthly payment option at the point of sale, allowing users to choose to extend payments for specific items up to a year. The new product allows users to borrow $400 to $4,000, double the maximum available with Afterpay’s interest-free loans that typically repay users in six weeks. [American Banker]
Dave Ramsey Says Life Is Better Without Credit Cards, But Here Are 5 Reasons It’s Actually Worse
Financial expert Dave Ramsey thinks you shouldn’t have credit cards. He has even said, “Simple: Life is better without credit cards,” advising that his recommended number of cards is zero. Unfortunately, Ramsey is unequivocally wrong about this. Life is not better without credit cards. It is arguably worse for five very important reasons. You do not earn rewards for daily purchases. It will be more difficult to build credit. You miss out on valuable cardholder benefits. You can incur more financial damage as a result of theft. It will be much more difficult to rent a car or book a hotel. [The Motley Fool]
A New Look at Commercial Credit Cards in a High Inflation Environment
The United States and much of the world is facing an inflationary environment not seen in more than 40 years. Sustained high inflation is proving persistent and showing no signs of slowing down. This has major implications for businesses that buy goods and services as it raises their prices and makes running their business more expensive. On the supplier side, any delay in receiving payment for a product from a company means that money is worth less when they receive it than when they submit an invoice. The typical method of paper checks in business-to-business payments is less effective for all parties involved in times of inflation. These reasons are why commercial credit card payments are becoming more and more popular. [Payments Journal]
USPS employees arrested in $1.3 million credit card fraud, identity theft
The Justice Department said three US Postal Service employees were arrested last week in connection with theft and unauthorized use of credit cards, causing the loss of more than $1.3 million. According to a release from the DOJ, individuals allegedly worked with USPS mail carriers to steal credit cards from the mail before delivering them to assigned customers beginning between, in, or around 2018. The individuals are accused of using the stolen credit cards on high-end sellers and selling some of the merchandise purchased on LuxurySnob.com. [Fox Business]
Janice has been with businesskinda for 5 years, writing copy for client websites, blog posts, EDMs and other mediums to engage readers and encourage action. By collaborating with clients, our SEO manager and the wider businesskinda team, Janice seeks to understand an audience before creating memorable, persuasive copy.