The Surge in Credit Card Delinquencies Might Be a Harbinger of a Coming Recession
Late payments on credit card balances are rising, and that could be a warning sign of difficult times to come in the US economy, according to Wells Fargo. Strategists at the bank pointed to credit card delinquencies surging among commercial banks. And for banks outside of the top 100 in asset size, late payments on credit card balances hit an all-time high. Rising late payments put more pressure on small- and medium-sized banks, strategists said, during a time when markets have been increasingly concerned about bank stability and rising debt levels in the US. In August, Moody’s downgraded several US banks, with S&P making similar moves on Monday. Meanwhile, credit card debt also notched $1 trillion for the first time in early August. [Business Insider]
Gen Z Relies More on BNPL for Small, Everyday Purchases
While credit cards remain dominant, BNPL options have gained popularity due to their easy access to credit and flexible payment plans beyond the traditional 30-day schedule, which appeals to many consumers, according to a PYMNTS study. In terms of BNPL use across demographics, consumers spent an average of $1,692 via BNPL and $1,006 via credit card. Among millennials and Gen Z consumers, the prime demographics for BNPL, the dollar value of BNPL purchases was higher than those made with credit cards, with millennials spending $1,851 via BNPL and $1,485 via credit card, while Gen Z consumers spent $1,230 via BNPL and $1,112 via credit card. Gen Z consumers primarily use BNPL for practical, smaller purchases, such as clothing, which accounted for 39% of BNPL use among Gen Z consumers, followed by groceries and restaurant purchases. Baby boomers and seniors are more likely to use BNPL for big-ticket items, such as furniture purchases. [PYMNTS]
Buy Now/Pay Later Fintechs Pin Hopes on Plastic Cards
U.S. consumers juggle a growing array of payment options, and buy now/pay later fintechs are adding another choice to the mix: BNPL-branded cards to use in stores. BNPL lender Affirm recently rolled out the Affirm Card, a physical version of its 11-year-old online instant-financing service, months after rival Klarna launched its own plastic Klarna Visa. Block’s BNPL unit Afterpay also has a virtual Visa card consumers can use to pay in stores. The moves come as the BNPL later industry faces the growing likelihood of regulations that could rein in some of the free-wheeling industry’s practices, or at least require operators to report consumer borrowing activity to credit-reporting bureaus to address consumer lending risk. [American Banker]
Americans Face an Epidemic of Loneliness. For Some, Supermarket Self-Checkouts Make It Worse
This year, in a stark warning about epidemic levels of loneliness and isolation, the U.S. surgeon general dedicated a section of his advisory to the effects of technology on social connection. Two-thirds of Americans said technology has made it harder to meaningfully connect, and nearly 70% said it has led to a decrease in empathy, according to a PlayUSA survey. Still, 66% of respondents said they would choose a self-service kiosk over a human-run checkout, often citing speed and a preference not to talk to anyone. But there was a sharp divide along generational lines: Whereas 84% of Gen Zers prefer self-checkouts, the number dropped to 46% for baby boomers. [The Los Angeles Times]
The Strategy Behind Amazon Pay’s Buy Now, Pay Later Push
Amazon Pay is doubling down on offering buy now, pay later to other retailers who use its payments service on their own sites. It has rolled out two different BNPL programs to serve different customer segments, ahead of the holiday season. The first allows retailers using Amazon Pay to offer their shoppers the buy now, pay later services of Affirm. Shoppers will see this as an option at checkout when they make a qualifying purchase. They can choose from “pay in four” BNPL plans that have a 0% interest rate or longer monthly payment installment plans that generally carry a flat interest rate. The second program is for those who have Prime Visa and Amazon Visa credit cards. These cardholders will have a new BNPL option that lets them avoid interest charges. [The Financial Brand]
PayPal Finally Launches Apple Pay Support for its Credit and Debit Cards
PayPal is finally rolling out Apple Pay support to its PayPal credit and debit cards. This move was first announced last year as part of a trio of ways PayPal was planning to expand its adoption of Apple Pay, alongside broader support for Apple Pay online and Tap to Pay on iPhone. With today’s change, PayPal users who have a PayPal-branded debit or credit card can now add their card to the Apple Wallet app. PayPal users can head to the PayPal app on their iPhone and look for a new banner on the app’s homepage that says: “Pay with your iPhone.” Tapping this will open the Apple Wallet app, where you can add your PayPal credit or debit card. [9 to 5 Mac]
US Treasury, IRS Propose Cryptocurrency Regulations for Brokers
Two United States federal agencies, the Department of the Treasury and the IRS, have released a set of cryptocurrency regulations proposal detailing brokers’ reporting requirements. The proposed rules would require digital asset brokers, including trading platforms, payment processors, and certain hosted wallet providers, to report gross proceeds for all sales or exchanges of digital assets starting on January 1, 2025. Brokers, referred to as “digital asset middlemen” in the regulatory proposal, will also be subject to providing information on gains and losses incurred during the sale of crypto assets. However, this requirement will kick in on or after Jan. 1, 2026. [Coin Telegraph]
Report Shows Consumers Prefer to Use Debit Cards for Most Purchases
A new report from J.D. Power U.S. found debit cards are used by more consumers than any other form of payment at the point of sale, with 78% of consumers saying they use debit cards for the majority of their purchases. However, the report found consumers on average tend to use at least four different methods of payment at varying times. The report found that 74% said they use cash, 66% use credit cards, 36% that use gift cards, and 28% said they use buy-now-pay-later. Merchant apps and payment by check were cited by 20% of consumers with just 7% using digital payments like Zelle or PayPal, and only 3% saying they use cryptocurrency. The report found that 55% of consumers used non-traditional payment methods in the past 90 days, with the majority of those being digital payments and buy-now-pay-later options. [Talk Business]
Medical Credit Cards Can Be Poison for Your Finances
Medical credit cards have proliferated in health care offices across the nation. One major card provider, CareCredit, is offered in more than 250,000 health care provider offices, an increase of more than 40% from a decade ago, according to a recent CFPB report. The cards may seem appealing because they offer so-called deferred interest, which comes with 0% APR interest for an introductory period. But the “deferred” part of the agreement isn’t favorable for borrowers if they can’t pay off their bill in full before the grace period ends. If they still have a balance, they’re charged all the interest they would have accrued since the original charge date, the federal agency noted. Consumers paid more than $1 billion in these interest payments from 2018-2020, the study said. The cards also don’t provide the same type of financial protections as debt held by a health care organization. That’s because any charges on these cards aren’t considered medical debt. [CBS News]
J.D. Power Names Best Credit Cards, Finds Rewards Are Less Rewarding
American Express defended its crown in the annual J.D. Power U.S. Credit Card Satisfaction Study, claiming the top spot for the fourth year in a row and the 13th time in the 17-year history of the report. Discover tied for second, continuing its string of finishing first or second every year since the study’s inception in 2007. Bank of America joined Discover in that second-place dead heat. In a new twist, J.D. Power awarded honors to specific credit cards as well. In the no-annual-fee category, the blue ribbon went to the Capital One SavorOne Cash Rewards Credit Card. The Discover it Student Cash Back card was next, followed by the Blue Cash Everyday Card from American Express. [Bankrate]
Read the full article here
