By Interest Rates on Mortgages, Cars, and Credit Cards Will Keep Getting More Expensive in 2023
Borrowing money to buy a house or a car won’t get any cheaper this year, the nation’s central bank just confirmed. On Wednesday, the Federal Reserve released its minutes from the Federal Open Market Committee’s (FOMC) December meeting, when it announced it would be raising interest rates by 50 basis points. That increase was a slowdown from prior meetings when the Fed raised rates by 75 points, and it came after November marked a slowdown in inflation to 7.1% year-over-year. While the economy appears to be moving in the right direction, the Fed noted in its minutes that inflation is “unacceptably high” and still remains well-above the pre-pandemic level of 2%, and it anticipates rate hikes will continue throughout 2023.
More Debt and Fewer Rewards: Credit Card Trends to Watch in 2023
If you want a good prediction of tomorrow’s economy, watch what moves credit card issuers make today. Issuers will likely turn off the spigot of generous incentives and easy credit in 2023 in response to a weaker economy, according to analysts. We spoke to credit experts about emerging credit card trends, how they may impact consumers and how you can prepare. People might find themselves in more credit card debt. Credit card debt might get even more expensive. Bonuses and rewards will probably be good, but not great. It might get harder to qualify for credit cards with bad credit.
The Growing Prominence of Alternative Payment Methods over Credit Cards in Emerging Markets
It is no secret that the popularity of alternative payment methods (APMs) has grown exponentially in recent years. The global rise of eCommerce, accelerated in large part by the pandemic, contributed significantly to the prevalence of APMs. They typically have a lower risk of fraud compared to credit and debit card payments and are more secure, making them ideal for online transactions. Alternative payment methods are ways of making purchases without the need for a bank account, or physical payment card. They come in many forms, such as digital wallets, cryptocurrencies, bank transfers, mobile payment applications, or even prepaid cards. Among their many benefits are speed, ease, and accessibility.
UK Credit Card Borrowing Soars to Highest Monthly Level Since 2004
Credit card borrowing in the UK soared in November to its highest monthly level since 2004 amid mounting pressure on households from the cost of living crisis. The latest snapshot from the Bank of England showed individuals borrowed an additional £1.5bn in all forms of consumer credit, of which £1.2bn was on credit cards, as concerns mounted over the impact of high inflation on struggling households. Coinciding with the beginning of the Christmas shopping period and rising energy bills, the jump from October’s £700m in unsecured borrowing prompted concerns among anti-poverty charities that some people were turning to expensive forms of credit to make ends meet.
Digital Wallets Could Cost Banks Billions in Lost Payments Income
Next-generation payment methods such as account-to-account transfers and digital wallets are gaining traction in the U.S. as well as globally. Their growth comes at the expense of credit cards and other traditional payments, according to a study by Accenture. The consulting firm estimates that such changes in consumer payments preferences will put up to $31.4 billion of revenue at risk for U.S. banks in coming years (2023 through 2026). To avoid these snowballing revenue losses, banks must begin to explore newer payment channels in earnest or come up with competitive moves to counter the growing consumer trend.
U.S. Regulators Warn Banks over Cryptocurrency Risks
U.S. regulators have issued their first ever joint warning to banks over the risks associated with the cryptocurrency market. The watchdogs told financial institutions to be wary of potential fraud, legal uncertainty and misleading disclosures by digital asset firms. Banks were also cautioned over the “contagion risk” from the sector. In the joint statement, the U.S. Federal Reserve, Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency said they were closely monitoring the crypto activities of banking organizations.
Progressive Senators Sound Alarm Over Rise of ‘Predatory’ Medical Credit Cards
A group of progressive senators raised alarm this week over a pernicious outgrowth of the United States’ for-profit healthcare system: medical credit cards. In a letter to the chief executives of Wells Fargo and Synchrony Financial—two large issuers of medical credit cards—Sens. Elizabeth Warren (D-Mass.), Ed Markey (D-Mass.), Bernie Sanders (I-Vt.), Chris Murphy (D-Conn.), and Sherrod Brown (D-Ohio) expressed concern that “given the circumstances in which these cards are used, medical credit cards could be predatory to patients seeking medical care and leave patients stuck paying higher costs with hefty, high-interest debt.”
Caught in Southwest Airlines’ Holiday Meltdown? Credit Card Insurance Benefits Could Come to Your Rescue
For more than a week, Southwest has suffered through a historic meltdown that’s wrecked both its reputation and the travel plans of passengers. Mass cancellations and delays have sent hundreds of thousands of people scrambling to rebook flights and accommodations. To add insult to injury, many have also been separated from their luggage. The airline might reimburse passengers some of the costs they’ve incurred as a result of disrupted travel plans. But if you’ve booked your Southwest flight with a credit card that offers travel insurance, you may have better chances of getting your money back. Here’s what Southwest may agree to cover, and how your credit card might help if the airline falls short of your expectations. [CNBC]
The Downsides of Using Buy Now, Pay Later
The use of “buy now, pay later” credit spiked during the holiday shopping season, retail numbers show. But as easy as it is for shoppers to use the service, some may now find it difficult to make the payments or manage returns. More than a quarter of Americans have used the option to pay for items like clothing, electronics and appliances, Consumer Reports found in a summer survey, up from 18% earlier in the year. There is rising concern among regulators and consumer advocates that the loans lack important customer protections and that borrowers may be getting in over their heads. More than a quarter of people who have used a pay-later loan reported having at least one problem, like being overcharged or trouble getting refunds. [The New York Times]
Consumers Are Placing Their Trust in Mobile Deposits. Here’s How Banks Can Keep It.
In our post-pandemic world, it’s evident most people have become used to interacting with their banks online and aren’t interested in returning to their old in-person, branch-based banking habits. According to a new survey, mobile deposit is a huge driver of this; nearly 88% of Americans accessed their checking account(s) using a smartphone or tablet during 2022. Part of the reason for this rapid adoption is that 90% of consumers say they are at least somewhat confident in their bank or credit union’s security/fraud capabilities. With this data in mind, developing an excellent mobile experience for customers requires ensuring the highest level of security without sacrificing convenience. This is best done by implementing unique technology features such as biometrics and advanced anti-fraud security measures. [Biometric Update]
What Is a Flexible Spending Credit Card?
Flexible spending credit cards work largely on the same principles as traditional ones—they still act as fully functional credit cards. They differ only in that they employ a variable credit limit. A pre-set credit limit serves as a baseline, but the cardholder has the opportunity to effectively increase it at certain times without getting dinged. With a traditional, fixed-limit credit card, the issuer’s evaluation of a person’s creditworthiness is largely confined to the application process. By contrast, with a flexible spending credit card, the issuer reassesses your use of the card to determine the extent of approved over-limit spending. This means that ongoing changes in the cardholder’s finances can impact how they’re able to use the card. When the cardholder doesn’t exceed their baseline credit limit, their flexible spending credit card is virtually the same as a traditional one.
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