U.S. Credit Card Defaults Soar to Highest Level in 14 Years
Experts are sounding the alarm over a new report indicating credit card loan defaults soared this year, warning the dam is about to break on Americans’ record-high consumer debt. During the first nine months of 2024, lenders wrote off more than $46 billion in seriously delinquent credit card loans, according to a report from the Financial Times citing data analyzed by BankRegData. That’s an increase of 50% from the first three quarters of 2023, and the highest since 2010. “High-income households are fine, but the bottom third of US consumers are tapped out,” Mark Zandi, head of Moody’s Analytics, told FT. “Their savings rate right now is zero.” [Fox Business]
New Data Shows Consumers Take Strategic Approach to Credit Usage
Increasingly, consumers strategically use multiple credit products to maintain financial flexibility and maximize benefits. Credit cards remain the most widely used product, with 68% of consumers holding active accounts. Higher-income consumers lead in adoption of credit cards, in addition to mortgages and other key products. More than half of consumers express interest in obtaining new credit products, signaling ongoing demand. Lenders aware of these demands can position their products to appeal to credit seekers. Consumers often rely on credit to bridge financial gaps, as 61% of consumers use credit out of necessity at least occasionally, and 20% would forgo essential purchases without access to preferred credit options. Monthly spending on credit cards and store cards averages $2,721, underscoring the pivotal role credit plays in how consumers manage their finances. [PYMNTS]
2025 Financial Forecast: What to Expect in Mortgages, Investing, Banking, and Credit Cards
Since the Federal Reserve began lowering its target federal funds rate range earlier this year, we’ve already seen some credit card interest rates go down. In the new year, experts expect the Fed to cut rates further, but we’ll have to wait and see just how quickly they’ll do so and how low rates will go. Recently, some expert predictions say the frequency of rate cuts may slow in 2025. If the Fed does cut rates more, you will likely see interest rates on credit cards to continue falling too. But like 2024, that doesn’t mean you’ll see a significant difference in your APR. [Yahoo Finance]
Fed Rate Cuts Won’t End the Sting of High Interest Rates for Subprime Cardholders
Credit card delinquency rates, or debt that’s at least 30 days past due, for subprime borrowers had risen to 15.68% by the third quarter of 2023, from 11.12% in the first quarter of 2022, when the Fed first raised its target rate. Also, with banks tightening lending standards in 2024 for those with lower credit scores, subprime borrowers are finding it harder to qualify for new cards. [Bankrate]
CFPB Sues JPMorgan Chase, Bank of America, and Wells Fargo for Allowing Fraud to Fester on Zelle
The CFPB sued the operator of Zelle and three of the nation’s largest banks for failing to protect consumers from widespread fraud on America’s most widely available peer-to-peer payment network. Early Warning Services, which operates Zelle, along with three of its owner banks—Bank of America, JPMorgan Chase, and Wells Fargo—rushed the network to market to compete against growing payment apps such as Venmo and CashApp, without implementing effective consumer safeguards. Customers of the three banks named in today’s lawsuit have lost more than $870 million over the network’s seven-year existence due to these failures. [CFPB]
Why More Americans Are Turning to Buy Now, Pay Later Payment Plans
Buy Now, Pay Later services are most popular during holiday months. Retailers across markets have increasingly adopted BNPL options because they convert window shoppers into purchasers and push those customers to check out with fuller carts, according to a recent study. BNPL payment plans especially influence shoppers who usually spend less and are more reliant on credit cards. People who have faced a financial disruption in the past year are more likely to use BNPL services. Millennials and Gen Z more likely to have used Buy Now, Pay Later services. Younger generations are more likely to encounter issues with BNPL services. [CNN]
Digital Wallets Go Global, but Local Nuances Remain
A recent study in five countries (Brazil, France, Germany, the United Kingdom and the United States) found that consumer awareness of leading digital wallets like Google Wallet, Apple Wallet and Samsung Wallet is remarkably consistent. In the U.S., roughly three-quarters of respondents were familiar with each platform, while in Brazil, the figure hovered around 50%. Despite high awareness, overall usage remains relatively low. Apple Wallet leads the pack globally with 5.9% penetration, followed by Google Wallet at 2.6% and Samsung Wallet trailing at 1%. User satisfaction is consistently high across all platforms. Google Wallet boasts an impressive 81% satisfaction rate among its users, slightly edging out Apple Wallet at 78% and Samsung Wallet at 62%. This suggests that users who adopt digital wallets find them highly beneficial and are likely to continue using them. [PYMNTS]
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