How Inflation and Buy Now, Pay Later Changed Buying Behavior

New report reveals how consumers have changed their behavior due to inflation and the economy

People of all income levels, including the wealthy, are trying to stretch their dollars amid the current economic downturn. According to a new survey of 4,000 people by consulting firm McKinsey, nearly three out of four adults are “trading down” – that is, they are trying to cut back on spending in areas such as the grocery store. Sixty percent of respondents said they have reduced the amount of things they buy while 44% have delayed a purchase. And 37% have opted to shop at cheaper retailers or are more likely to look for discounts. [Fortune]

Buy now, pay later is eating away at credit card usage, says JD Power

Consumers are spending significantly less on their major credit cards, according to JD Power’s 2022 U.S. Credit Card Satisfaction Study. Overall, credit cardholders are spending 42% of their monthly spending on their primary credit cards, down from 47% in 2021 and 2020, and down from 50% from 2019. The decline comes despite an increase in five points year over year, to 810, in JD Power’s consumer satisfaction score for credit cards. Improvements made by card issuers to service, more favorable credit card terms, and mobile and communication factors/sub-factors are the main reasons for the increase in satisfaction. One of the culprits for the decrease in card spending is buy now pay later loanswhich offer consumers an alternative and more flexible method of financing purchases than credit cards. [Digital Transactions]

More and more Americans rely on credit cards. It could be very expensive

More than 175 million Americans have at least one credit card and about half of active accounts carry a balance, according to the CFPB. Credit card interest rates rose despite a stable share of riskier subprime cardholders, historically low prime rates and falling charge-off rates, a measure of accounts deemed uncollectible after extreme late payment. The prime rate is the interest rate that banks charge their strongest corporate clients and is used as a benchmark for consumer loans. The CFPB found that last year the spread between the prime rate and the average annual percentage rate on credit cards was at record lows, even as delinquencies and actual delinquencies fell to lows. record levels. [CNN]

Household debt tops $16 trillion in 2n/a Trimester

Household debt rose in the second quarter of this year as consumers took out more loans in several markets, according to the Federal Reserve Bank of New York. Household debt rose 2%, or $312 billion, in the second quarter, bringing the total to $16.15 trillion, the bank said in its quarterly household debt and credit report. [Fox Business]

70% of Americans have free money they don’t use

At first glance, Americans seem to like their rewards credit cards. After all, 87% of all credit card holders in the United States have at least one piece of plastic that helps them earn travel, cash back, and other credit card rewards. But most Americans don’t use the card benefits they’ve earned. That’s according to new research from Lending Tree that shows 70% of all credit card holders in the United States have unused rewards, points or miles. Of this group, the majority (49%) have unused cash back rewards, while 13% have unused airline miles and 11% have unused fuel points. That’s not all. The report also notes that 40% of rewards credit cardholders have not cashed in any awards over the past year. [The Street]

One of the best cash back cards with no annual fee now offers a $200 welcome bonus

Citi announced a new welcome offer for its Citi Double Cash card that would allow new cardholders to earn $200 after meeting the minimum spend requirement of $1,500 in the first six months. The Citi Double Dash card is a great product because it offers 2% cash back for purchases: it’s 1% cash back for all qualifying purchases, plus an additional 1% cash back after you paid your credit card bill. You won’t need to track specific spending categories like you would with other cards. [CNBC]

Amex Platinum cardholders will soon have access to a free Paramount+ membership, thanks to the card’s free Walmart+ membership

The Platinum Card from American Express has added a ton of new benefits over the past year, many of which may seem a bit niche or unusual for a premium card. One of them is a free subscription to Walmart+; cardholders receive a statement credit for the membership fee each month when they charge it to their card. Walmart+ is actually quite helpful and can save you money with perks like free grocery delivery and gas discounts. And now there’s an added perk coming to the service: Starting in September, Walmart+ members will get access to a free Paramount+ Essential streaming subscription. [Business Insider]

Bank of America sweetens card rewards with one-year subscription to Grubhub+

Bank of America is offering eligible BofA cardholders a free year of Grubhub+ membership, another example of banks watering down their rewards programs to entice cardholders. Starting August 18, eligible cardholders can activate a free one-year Grubhub+ membership trial, worth nearly $120. The deal offers $0 delivery charges on orders of $12 or more and exclusive restaurant perks on Grubhub. [Seeking Alpha]

Capital One $190M Data Breach Settlement: Are You Eligible for a Payout?

Capital One’s infamous 2019 data breach exposed the personal information of more than 100 million people and resulted in a class action lawsuit that has been tentatively settled for $190 million. Plaintiffs in the case say a hacker could never have broken into Capital One’s cloud computing systems, which were hosted on Amazon Web Services, if the company had taken adequate cybersecurity measures. In their complaint, they allege that Capital One “was aware of the particular security vulnerabilities that enabled the data breach, but still failed” to protect customers, exposing millions of people to risk of fraud and identity theft. [CNet]

Wait, when did everyone start using Apple Pay?

It took longer than expected for the iPhone to become a wallet. But Apple’s patience is slowly paying off. Nothing broke when in 2014 Apple introduced a new service called Apple Pay. If the quality of destruction was measured by the speed at which it happened, the flashy innovation of an industry titan would have been considered a disappointment. The idea that this would render the wallet obsolete seemed ridiculous when Apple Pay’s adoption rate was below expectations. Wall Street analysts and iPhone users were skeptical for the next few years. The credit card experience did not appear to be an issue requiring a solution from Apple. [The Wall Street Journal]

Mastercard faces backlash from retailers over installment payments

Mastercard is facing resistance from retailers over a new product that allows customers to pay for purchases in installments. The payments giant has started telling merchants and their banks that it will charge retailers 3% of the purchase price each time a consumer chooses to use the new program, according to people familiar with the matter. Retailers will be automatically enrolled in Mastercard’s new buy it now and pay later service, although they will have the option to opt out. [Bloomberg]

American Express will offer credit cards to Fintechs via WebBank

WebBank, which already helps fintechs launch credit and debit cards on the Visa and Mastercard networks, now has a third option after adding the American Express network and its proprietary card benefits to its menu. WebBank plans to start issuing Amex credit cards through fintechs later this year with the option to include loyalty points and card offers. WebBank is gaining momentum in fintech after launching fintech Klarna-branded Visa debit card in June and Mastercard-branded Gemini Crypto Rewards credit card in April. [American Banker]

How much should the credit card processing fee be? New bill says not so high

For years, merchants have battled banks and payment processors over credit card processing fees. This fight has come to a head now that a bipartisan bill to reduce these fees is on the table. Retailers say consumers will benefit from the savings passed on, but opponents say that’s not likely. [USA Today]

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