This Week In Credit Card News: How A Cut In Swipe Fees May Lower Your Rewards; Credit Cards With A Fragrance

New Bill on Credit Cards Could Wipe Out Rewards Programs: Southwest

Southwest Airlines said a new bill in Congress could “completely end” loyalty rewards programs. It’s taking aim at the Credit Card Competition Act, which seeks to lower credit card fees. Airlines like Southwest say the bill cuts funds from payment networks, who’d be less willing to offer rewards. [Business Insider]

Mastercard is trying to create a credit card with a special fragrance

getty

When You Think About Your Credit Card, Does a Fragrance Come to Mind?

Corporations are now mimicking fashion designers and hiring development firms to create a signature scent that clients won’t forget. Smell is increasingly becoming part of the brand strategy for companies in unexpected industries. Mr. Rajamannar spearheaded the “multisensory brand identity” effort for Mastercard, and commissioned Ms. Baghriche and Firmenich to create a dual set of complementary fragrances inspired by the interlocking red and orange circles from Mastercard’s logo and the abstract prompts “passion” and “optimism.” [The New York Times]

Fed Proposes Shrinking Fees Banks Charge on Debit Card Transactions

The U.S. Federal Reserve on Wednesday proposed slashing by nearly a third the amount of so-called “swipe fees” banks can charge merchants for processing debit-card transactions, setting up a pitched battle between the two industries over potentially billions of dollars in revenue. Citing data that showed the costs of processing such transactions had fallen by roughly half in recent years, the Fed proposed cutting the current cap from 21 cents per transaction to 14.4 cents per transaction. The fees generated $31.59 billion for lenders in 2021, according to Fed data. [Reuters]

Americans Ran Up $105 Billion in Credit Card Interest Last Year Alone

In 2022, about one in 10 general purpose credit card accounts in the United States were in “persistent debt”, a situation where borrowers are charged more in interest and fees than they pay down in principal. That’s up from 8.4% in 2021, a trend that the CFPB blames on shrinking paychecks (after adjusting for inflation) and rising borrowing costs. Americans were hit with $105 billion in credit card interest last year alone, according to the CFPB’s biennial consumer credit card report. That includes $30.5 billion in the fourth quarter, the highest since at least 2015. Roughly one in three cardholders with the lowest credit scores, subprime and deep subprime, were in persistent debt last year. That’s up from around 25% in 2021 and approaching pre-Covid levels. CFPB officials expect the number of Americans stuck in this doom loop will go even higher in 2023. [CNN]

Americans Are Struggling to Pay Their Debts as Economy Tightens

Americans are having a harder time making interest payments as savings are shrinking and a barrage of interest rate hikes by the Federal Reserve have jacked up the cost of financing. Delinquency rates on credit cards, mortgages and auto payments have all been ticking up as the level of household savings, which swelled under stimulus payments handed out during the pandemic, have been declining. Ninety-day delinquency on credit cards has increased to 5.1%, up from 3.4% in the second quarter of last year, Federal Reserve data shows. [The Hill]

Retail Credit Card Rates Hit Record High

Interest rates are continuing to climb just as the holiday shopping season is approaching, making it more costly for shoppers who plan to charge using store cards. The average retail credit card annual percentage rate (APR) hit a new record high of 28.93% this year, up from 26.72% in 2022 and 24.35% in 2021, according to Bankrate’s annual Retail Cards Study out Monday. 16 retail credit cards charge 32.24% to all cardholders who carry balances, including those from Jared, Kay Jewelers, Zales, owned by Signet Jewelers, QVC, Walgreens, Ross, Victoria’s Secret, T.J. Maxx and Wayfair. [Fox Business]

Apple Pay Later Is Now Available to All Users in the U.S.

Apple is making Apple Pay Later available to all users in the United States, after initially releasing it to a limited number of users back in March. Apple Pay Later allows users to split the cost of an Apple Pay purchase into four equal payments over six weeks without interest or late fees. The tech giant’s website now advertises that you can use Apple Pay Later for purchases between $75 and $1,000 made on iPhone and iPad. [Tech Crunch]

A Credit Card Christmas: Taking On Shopping Debt Carries More Risk This Holiday Season

Shoppers are springing for holiday gifts and decorations, but bustling mall traffic, full shopping bags and large hauls under the Christmas tree could hide a challenge for retailers: rising credit card balances and what that may mean when the bills come due. This holiday season, shoppers who ring up purchases on credit cards will pay more interest if they carry balances from month to month after the Federal Reserve’s string of rate hikes. The cost of borrowing has climbed as credit card delinquencies have ticked up. In addition, student loan payments have resumed after more than three years of a pandemic-related pause, adding to the debt that many Americans are trying to pay off. Shoppers making their holiday purchases on credit will do so at a time when consumers are taking on more debt, and face bigger risks from carrying a balance. Retailers will not have a clear idea of how those factors will play out until January or February. [CNBC]

Americans Relying Less on Cash, More on Credit Cards May Pay More Fees

Businesses used to swallow most of the costs of credit card processing, figuring that accepting credit cards would bring in more business to offset the costs, or build them into prices. However, after more than two years of scorching inflation that’s boosted the price of everything, businesses – especially smaller ones – sought ways to offload some costs to survive. Credit card fees were an obvious choice for many. Businesses usually pass on the cost of credit card processing by charging customers an additional amount if they pay by card. In general, the charges are a percentage of the total purchase, typically the 1.5% to 3.5% that credit card companies charge merchants to accept and process the transaction. Sometimes, though, they’re flat fees. Or by offering a discount if customers pay cash. Discounts also are a percentage of your bill or a flat amount. [USA Today]

Bank Of America, NRA, And Mastercard Are Lobbying on Marijuana Banking

Bank of America, the National Rifle Association, and Mastercard are among the entities that are currently lobbying on the marijuana banking act. Each entity included the Secure and Fair Enforcement Regulation, also known as the SAFER Banking Act, in their lobbying disclosure for the third quarter of 2023. The bill, which has recently been voted in the Senate Banking Committee, aims to ease access to banking services for marijuana businesses as they are currently unable to due to the illegal status of marijuana at the federal level. [Forbes]

Nearly 6 in 10 Consumers Who Use Mobile Wallets to Pay Bills Face Difficulties

The level of satisfaction among consumers using mobile wallets to pay bills is notably high. However, the system is still far from completely reliable, as more than half of users claim to have experienced issues when paying their bills with these systems. According to this study, 3 out of 4 U.S. consumers used mobile wallets last year, and 9% say this is their preferred method for paying bills. The ability to make payments anywhere and anytime, as well as the convenience of managing payments in real time, are key factors that attract consumers to mobile wallet bill pay. 58% of users experienced difficulties when paying bills using a mobile wallet in the last year. Security is the most common objection to mobile wallets among those who do not use them, with 35% of consumers citing it as their most important reason for not using mobile wallet bill pay. [PYMNTS]

Increased Welcome Offer on All Southwest Personal Cards

The season of giving is near, and Southwest is feeling generous with enhanced welcome offers on each of its personal credit cards. The best part: Points earned from these welcome offers count toward the Southwest Companion Pass, which is essentially a BOGO anytime you fly the airline. The bonus for these cards often sits at 50,000 points, but Southwest has been known to elevate that bonus at different times throughout the year. Starting October 26, 2023, the welcome offer for the Southwest Rapid Rewards Plus Credit Card, Southwest Rapid Rewards Premier Credit Card and Southwest Rapid Rewards Priority Credit Card all rise to 75,000 points after spending $3,000 in the first three months from account opening. [Forbes]