Inflation, rising interest rates leading to skyrocketing card debt, recession fears

Consumers turn the market down to keep racking up credit card debt

Credit card officials have begun to see U.S. consumers shift spending toward lower-cost products as they grapple with inflation at its highest level in 40 years. Overall credit card volume soared 20% to $1.1 trillion among the nation’s largest lenders in the second quarter, with many reporting record spending for the period. Executives said the recent price spike has done nothing to dampen consumer appetite for travel or goods and services. [Bloomberg]

Inflation and Rising Interest Rates Lead to Skyrocketing Credit Card Debt


Nearly 20% of Americans are afraid to check their credit card statements as interest rates approach an all-time high

As credit card debt soaring interest rates, many spenders fear high balances. Nearly one in five Americans are afraid to check their credit card statements, according to a recent report by travel website Upgraded Points, which surveyed 3,500 people in April 2022. As Americans have reduced their card debt In 2020, high balances returned amid soaring costs for basics like gas, groceries and housing. Credit card balances jumped $71 billion year-over-year, topping $841 billion in the first quarter of 2022. [CNBC]

Credit card spending soars as US consumers battle rising inflation

Mastercard said spending on its network jumped 18% as US consumers battle unique levels of inflation in a generation. Payments volume soared to $1.65 trillion in the second quarter, beating the $1.64 trillion average of analyst estimates in a Bloomberg survey. The company raised its revenue growth forecast for the year after reporting a 58% increase in overseas payments as consumers flocked to take trips and get back on the road after two years of pandemic-induced shutdowns. . [Bloomberg]

US raises interest rates dramatically to rein in soaring prices

The US central bank has announced another unusual rise in interest rates as it struggles to contain soaring prices in the world’s largest economy. The Federal Reserve has indicated that it will raise its key rate by 0.75 percentage points. The bank has raised borrowing costs since March in an attempt to cool the economy and dampen price inflation. But fears are growing that the measures could tip the United States into recession. Recent reports have shown falling consumer confidence, a slowing housing market, rising jobless claims and the first contraction in business activity since 2020. [BBC]

US economy shrinks for second quarter, fueling recession fears

The drumbeat of recession intensified after the U.S. economy contracted for a second straight quarter, as decades-high inflation sapped consumer spending and interest rate hikes by the Federal Reserve have hampered businesses and housing. Gross domestic product fell at an annualized rate of 0.9% after falling 1.6% in the first three months of the year, the Commerce Department’s preliminary estimate showed Thursday. Personal consumption, the largest part of the economy, grew at a 1% pace, a deceleration from the prior period. [Bloomberg]

Senate bill targets Visa and Mastercard credit card fees

Two US senators are preparing legislation that would give merchants the power to process many Visa and Mastercard credit cards on different networks. The bill, which could be introduced as early as this week, aims to create more competition between US credit card networks, an industry where Visa and Mastercard have long dominated. Sen. Dick Durbin, a Democrat from Illinois, and Sen. Roger Marshall, a Republican from Kansas, are expected to introduce the bill. [The Wall Street Journal]

Apple’s entry into the BNPL space raises alarm bells at the CFPB

Apple’s move into the buy-now-pay-later space caught the attention of CFPB director Rohit Chopra, who is currently examining the broader implications of big tech companies becoming lenders. The CFPB is looking closely at the “implications of Big Tech entering this space” and considering a number of questions, including whether Apple Pay Later could “reduce competition and innovation in the marketplace,” said said Chopra, as reported by the Financial Times. . Apple Pay Later is one of about 80 BNPL products on the app shelf, including PayPal, Affirm, Afterpay and Klarna. The CFPB boss said that while his agency is concerned about the technology entering the BNPL space, there is also unease about how Apple uses the information collected in its subsequent purchase transactions. and whether they are combined with navigation, geolocation and health data. [PYMNTS]

33% of small businesses have been severely impacted by credit card fraud

All businesses, big and small, have at least one thing in common: payment processors. Cash-only businesses get away with not having to pay a processor to complete credit, debit and digital card payments, but this type of business is rare. Accepting card payments is convenient for you and your customers, but it does mean the risk of credit card fraud. And while point-of-sale platforms can help you better facilitate payments, they can bring their own obstacles. In a Forbes Advisor poll, 33% of small business owners said credit card fraud is a major problem. Is the risk worth the reward? [Forbes]

Buy now, pay later The industry is about to pass its first big test

Consumers can buy now and pay later for just about anything. Hailed as an indispensable alternative (and threat) to credit cards and predatory lenders, buy now, pay later has also been criticized as a gateway to debt for the young and inexperienced. Either way, BNPL represents one of the biggest and fastest changes in consumer credit in decades. [Bloomberg Law]

Credit Card FinTech Cardless launches partnership with Amex

FinTech Cardless Credit Card has entered into an agreement with American Express that allows a number of top US brands to launch digital cards on the Cardless platform. The company noted that the partnership comes with “significant” investment from Amex Ventures, the strategic investment arm of American Express. Cardless cards offer several features designed for digital native consumers, both in terms of security and ease of access. New users can apply for a Cardless card with their smartphone. Once approved, the virtual card will arrive in their mobile wallet within seconds, and a physical card will appear a few days later. Customers can manage their accounts through the Cardless app, with immediate access to things like rewards, purchase tracking and bill payment. [PYMNTS]

Discover Upgrade OneCard, a combined credit and debit card

Upgrade has been offering consumers personal loans, auto loan refinances, and other personal finance products since 2016. Today, the San Francisco-based fintech company introduces its latest product, Upgrade OneCard, which offers a unique combination of a debit card and a credit card, with a hint of “Buy now, pay later” thrown into the mix. The OneCard upgrade allows consumers to choose between “Pay Now” and “Pay Later” when it comes to paying for their purchases. For the first option, the amount will be immediately withdrawn from the cardholder’s current account, in the same way as a debit card. For the latter, the amount of the purchase will be spread over time to be reimbursed in fixed installments with interest, like a credit card. [CNBC]

About Shirley L. Kreger

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