This Week In Credit Card News: Inflation Causes Record High Card Rates; Travel Cards Giving Great Rewards

this-week-in-credit-card-news:-inflation-causes-record-high-card-rates;-travel-cards-giving-great-rewards

Credit Card Rates Hit a Record High as Fed Fights Inflation

It’s never a great time to carry credit card debt. But right now is arguably the worst time. The Federal Reserve’s war on inflation has driven up the average credit card APR to 19.04% as of November 9, according to Bankrate.com. That’s the highest rate since Bankrate.com’s database began in 1985, beating the prior record of 19% set in July 1991. The national average APR for credit cards has climbed by 2.74 percentage points so far this year, the biggest increase in a single year on record. [CNN]

Travel cards are giving lucrative rewards since consumers are traveling again

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Banks Are Going All-In on Premium Travel and Credit Cards

It might be the understatement of the year: Travel has changed since the start of the pandemic nearly three years ago. More than ever before, airlines and travel credit card companies alike are laser-focused on premium travel: fancy first and business class seats, expanding and building new lounges, offering more travel perks, and luring customers in with huge credit card bonuses. After two years with little travel, airlines are finding Americans far more willing to splurge with their travel savings than they were in 2019. And the banks are capitalizing on it, too. Much like airlines, they’re leaning into the new premium travel emphasis by putting more money behind their top-tier credit cards in the form of new benefits and an unprecedented string of eye-popping welcome bonuses of 100,000 points or more. [Thrifty Traveler]

‘Pay By Bank’ Trend Is Next Front in Merchants vs. Banks Payments War

A growing number of small U.S. retailers have been encouraging shoppers to try an alternative to credit cards called “pay by bank,” and payments experts predict this option will take off in a much bigger way in 2023. Pay by bank is also called “account-to-account payments” or “bank-based payments.” It uses the automated clearinghouse system to take the money from a consumer’s checking account. Merchants can work with specialized payment companies like Catch, GoCardless and Trustly to allow consumers to pay for purchases with this method. The trouble for banks and credit unions is that pay by bank translates into a revenue hit, as it allows merchants to avoid the so-called “swipe” fees that come from card use. [The Financial Brand]

Holiday Shopping: Consumers Lean On Store Credit Cards to Offset Financial Burden

An increasing number of consumers are considering applying for store credit cards to try and offset the financial strain on their wallets during the upcoming holiday shopping season. This year, 35% of Americans are likely to apply for such cards, up from 29% a year ago, according to recent data from LendingTree. LendingTree found that 37% of people who signed up for a store credit card in the past have regretted that decision. About 14% of them say this has happened to them several times. [Fox Business]

Goldman Sachs, Eager to Grow Cards Business, Courted Credit Card Technology Firms

Goldman Sachs has expressed interest in buying a payments-technology firm to further build out its credit card capabilities, according to people familiar with the matter. Goldman executives had discussed acquiring Deserve, a fintech credit card platform that the bank already has close ties to, according to people familiar with the matter. Executives also sounded out another fintech credit card platform called Cardless and a payments company called CoreCard. [The Wall Street Journal]

Banks’ Bet on Subprime Consumers Sends Credit Card Balances to a Record

U.S. credit card balances surged to a record in the third quarter as banks bet that consumers with less-than-stellar credit will be able to handle more debt. Balances soared 19% to $866 billion, with average credit lines also climbing to an all-time high, according to TransUnion. The jump came after card originations to subprime consumers climbed more than 12% in the previous three-month period. Investors are closely watching delinquencies, a harbinger of future losses. The percentage of credit-card loans that were 90 days past due jumped to 1.94% in the third quarter, surpassing pre-pandemic levels for the same period, TransUnion said. [Bloomberg]

The Lines Between Credit Cards and Buy Now, Pay Later Are Blurring

Increasingly the walls between today’s BNPL, credit cards and even debit cards have been eroding as consumers’ options for buying things on credit become more complicated than ever. The well-publicized funding and valuation issues of the specialized buy now, pay later companies have caused them to think wider and broader beyond simple merchant-based ecommerce pay in four plans, yet more traditional consumer lenders have also been moving in on the BNPL firms’ turf with their own takes on BNPL. Increasingly, there is recognition that, in spite of the period of pandemic lockdowns, a huge amount of consumer spending still takes place at the physical point of sale. This realization and the quest for more volume and profit has added momentum to BNPL firms’ use of virtual cards and their adoption of actual plastic cards that can be used at the register. [The Financial Brand]

PayPal and Apple to Accept Each Other’s Payment Products

PayPal and Apple have struck a deal to start accepting each other’s payments products within their separate ecosystems. The pair have agreed to let US merchants accept contactless payments on their iPhones—using Apple’s new Tap to Pay technology—through the PayPal and Venmo iOS apps. Meanwhile, Apple Pay will be added as an option in PayPal’s unbranded checkout flows on merchant platforms. And, from next year, US customers will also be able to add PayPal and Venmo network-branded credit and debit cards to Apple Wallet. [FinExtra]

Costco’s Credit Card Changes in a Way You Won’t Like

For a while, the Costco Anywhere Visa Card by Citi and Costco Anywhere Visa Business Card by Citi offered free extended warranty protection, adding 24 months to manufacturers’ warranties, up to a seven-year total coverage limit. As many Reddit users have noticed, this benefit will end for both cards on January 22nd of next year. Any Costco purchases that qualify for the extended warranty made before that date will still get the warranty, but that won’t be the case for anything purchased after January 22nd. If you purchased something several years ago, your warranty still stands. [The Street]

13% of Credit Card Holders Could Lose Money for This Reason

A lot of people use credit cards to pay for purchases because doing so is more convenient than constantly hitting the ATM and paying in cash. But a big benefit to using credit cards is getting to accumulate rewards, whether it’s air miles, hotel stays, or good old cash back. But some consumers are losing out on credit card rewards by virtue of not reading the fine print, or understanding it. In a recent Wells Fargo report, 13% of consumers with reward cards don’t understand how their reward programs work. [The Motley Fool]

Kudos Raises $7 Million to Recommend the Right Credit Card for Shopping Rewards

Tapping into your credit card rewards isn’t easy. You might have to read the fine print for what purchases are eligible or sign up for notifications on which ones qualify when. Kudos wants you to make the most of your wallet and pick the best card every time you are ready to make a purchase. The company developed a free Chrome extension for a digital wallet that holds all of your cards—it supports over 3,000—and then calculates the rewards and benefits for each purchase and recommends the right card, which could be a store card and then helps you apply for it. [Tech Crunch]

The Opportunities and Challenges of Embedded Payments

As businesses look to provide their customers with more personalized experiences in a post-pandemic economy, embedded payments are starting to become a core part of the value proposition for many companies. A recent report by Ernst & Young identified seven factors that are shaping today’s payments landscape: open banking, embedded payments, digital wallets and super apps, real-time payments, BNPL, digital currencies, and cross-border payments. Let’s zoom in on the topic of embedded payments: why they matter, where they are headed, and the opportunities and challenges they present for banks and financial institutions. [TearSheet]

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