Americans cannot pay their debts because of inflation; Crypto Popularity Is Weakening

Inflation forces 26% of Americans to stop paying their debts

Given the way inflation has wreaked havoc on consumers since mid-2021, it’s easy to see why some people may have gone into debt over the past year. Or, you might run into debt before inflation set in and still have a loan or credit card balance. The sooner you pay off your debt, the less you are likely to spend on interest. More, pay off credit card debt in particular could do wonders for your credit score. But in a recent Morgan Stanley report, 26% of Americans say they are cutting back on their debt repayments because of inflation. And it’s a decision you might regret. [The Motley Fool]

Only around 30% of millennials are comfortable investing in crypto, down from around 50% in 2021

The popularity of cryptocurrency with American investors is on the decline. In 2022, only about 21% of Americans feel comfortable investing in cryptocurrency, according to Bankrate’s September survey. That’s down from 35% in 2021. While comfort levels fell among investors of all generations, the drop was steepest among millennials. Nearly 30% of U.S. investors aged 26-41 feel comfortable in 2022, down from nearly 50% in 2021. The drop isn’t surprising, given that nearly $2 trillion has been erased from the entire crypto market since November 2021. [CNBC]

In a payments-first industry, debit card usage exceeds credit card usage

Consumer use of debit cards eventually overtook that of credit cards. During the second quarter of 2022, 56.2% of consumers preferred debit as their primary payment card, compared to 39.5% for credit, according to a report by S&P Global Market Intelligence. These numbers represent a sea change in the payments landscape, as only 40.2% of consumers cited debit as their primary payment card last year, compared to 54.6% for credit. The reasons for this overwhelming change are varied. On a large scale, they include lower or no fees for using the debit card, faster settlement, the added security feature of a PIN code for card transactions, and no interest charges. Another factor is that consumers see debit as a way to avoid overspending and better manage their finances. [Digital Transactions]

46% of Americans still make this costly credit card mistake

One of the biggest misconceptions about credit cards is that carrying over a balance from month to month will boost your credit score. At this point, 46% of Americans mistakenly believe that leaving a small balance on their card is better for their credit score than paying off the balance each month, according to a recent study by NerdWallet. It is a costly mistake. In fact, any amount of revolving debt costs you interest. These are usually not calculated based on the amount of debt you carry over to the next statement period, but rather based on your daily average balance. Having a balance could also affect your credit score. [CNBC]

The Durbin Amendment will jeopardize security and innovation in the credit card market

One such amendment that could be considered is Senator Richard Durbin’s Credit Card Competition Act, which would effectively prohibit consumers, payment networks and financial institutions from determining how their credit card transactions are routed. If mega-merchants can route their cards through a cheaper network, interchange fees will go down, and Senator Durbin’s amendment assumes that if that happens, consumers will see lower prices. However, there are no free lunches in a market with such regulatory intervention: Interchange pays for credit card rewards, extending credit, and the cost of protecting small businesses and consumers from fraud. Reduced trade would cause credit card rewards programs to wither and more people would likely struggle to get credit cards. [Forbes]

Fed says debit cards must connect to multiple networks, even online

Debit card issuers have nine months to ensure that all transactions made with their cards, including cardless payments, can be processed by at least two unaffiliated networks. The same exclusivity prohibition has long applied to in-person debit card transactions under Regulation II. The Federal Reserve Board finalized a rule on Monday that applies to all other debit transactions, including e-commerce payments. Part of the Dodd-Frank Act, Regulation II governs interchange fees and debit card routing. The rule was intended to give merchants a way to control their spending by giving shoppers a way to choose a low-cost routing option when making a purchase. Card issuers and networks say their costs are fair and necessary to support innovation and fraud detection for card payments. [American Banker]

How has the pandemic changed the way consumers make major purchases?

While there is plenty of anecdotal evidence showing how the pandemic has changed the way consumers shop, Synchrony quantified it, noting that 76% of consumers surveyed use their mobile device to shop (up from 48% in 2019) while total online purchases soared to 26% from 16% two years ago; and 25% made major purchases online in 2021, up from 16% in 2019. And as consumers shop more online, they are also researching more about everything, including financing choices. [Furniture Today]

Mastercard pushes crypto further with new anti-fraud tool

Mastercard will launch new software that helps banks identify and cut transactions from fraud-prone crypto exchanges. Called Crypto Secure, the system uses “sophisticated” artificial intelligence algorithms to determine the risk of crime associated with crypto exchanges on the Mastercard payment network. The system relies on data from the blockchain, a public record of cryptographic transactions, as well as other sources. The service is powered by CipherTrace, a blockchain security startup acquired by Mastercard last year. CipherTrace helps businesses and government agencies investigate illicit transactions involving cryptocurrencies. Mastercard is launching the service amid rising crime in the nascent digital asset market. The amount of crypto entering wallets with known criminal ties hit a record $14 billion last year. [CNBC]

Buy now/pay later Fintech Afterpay launches interest-bearing loans

Afterpay is no longer just a “Pay in 4” buy now/pay later lender. The fintech, a unit of Block, is adding a monthly payment option at the point of sale so users can choose to spread out payments for specific items for up to a year. The new product allows users to borrow $400 to $4,000, double the maximum available with Afterpay’s basic interest-free loans that users typically repay over six weeks. [American Banker]

Dave Ramsey Says Life Is Better Without Credit Cards, But Here Are 5 Reasons It’s Actually Worse

Financial expert Dave Ramsey doesn’t believe you should have credit cards. In fact, he said, “It’s plain and simple: life is better without credit cards,” and listed his recommended number of cards as zero. Unfortunately, Ramsey is unequivocally wrong about this. Life is no better without credit cards. It is demonstrably worse for five very important reasons. You will not earn rewards for your daily purchases. It will be more difficult to build up credit. You’ll miss out on valuable cardholder benefits. You could end up with more financial losses due to theft. It will be much more difficult to rent a car or book a hotel. [The Motley Fool]

Rethinking Commercial Credit Cards in a High Inflation Environment

The United States, and much of the world, is facing an inflationary environment not seen in more than 40 years. Persistent and high inflation is proving stubborn and shows no signs of slowing down. This greatly affects businesses that purchase goods and services, as it raises their prices and makes it more expensive to run their business. On the supplier’s side, any delay in a company receiving payment for a product means that the money is worth less when they receive it than when they submit an invoice. The typical paper check method in business-to-business payments is less efficient for all parties involved in times of inflation. These reasons explain why commercial credit card payments are growing in popularity. [Payments Journal]

USPS workers arrested for $1.3 million credit card fraud and identity theft scheme

The Justice Department said three US Postal Service employees were arrested last week for theft and unauthorized use of credit cards, resulting in the loss of more than $1.3 million. According to a DOJ statement, individuals allegedly worked with USPS mail carriers to steal credit cards from the mail before they were delivered to assigned customers from or around 2018. The individuals are accused of using credit cards stolen from high-end retailers and sell some of the merchandise purchased on LuxurySnob.com. [Fox Business]