Despite Fed Cuts, Many Store Credit Cards Are Still Charging Customers Extreme Interest Rates
Many credit cards offered by major retailers continue to charge exorbitant annual percentage rates, despite moves by the Federal Reserve to lower interest rates in the economy. In a report released Wednesday, the Consumer Financial Protection Bureau found that 19% of retail cards had APRs above 35%. In December 2024, new cards offered by the top 100 retailers had an average private label APR of 32.66%. There is no federal cap on interest rates. And while many states have usury laws, credit card issuers are often domiciled in states with more liberal rules about how much interest they can charge on a credit card. [NBC News]
Stop using (but don’t cancel) your retail credit cards due to outrageous interest rates
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Fed Signals Intent to Slow Interest-Rate Cuts After Approving Quarter-Point Reduction
The Federal Reserve agreed to cut interest rates by a quarter-point Wednesday but signaled greater doubt over how much and how fast it would reduce them going forward. The latest reduction, which was approved by 11 of 12 Fed voters, will lower the Fed’s benchmark federal-funds rate to a range between 4.25% and 4.5%, a two-year low. [The Wall Street Journal]
New CFPB Tool Aims to Help Consumers Save Money on Credit Cards and Avoid Rewards Scams
The Consumer Financial Protection Bureau is warning credit card companies it’s on to their illegal bait-and-switch rewards tactics used on consumers. Some credit card companies are illegally devaluing rewards points and airline miles, relying on fine print to cancel rewards consumers earned, using vague language on how to earn rewards, or making it difficult to redeem rewards. It also called out extremely high interest rates and statement and late fees on retail credit cards. To help consumers, the CFPB launched the Explore Credit Cards tool using open data so people can more easily make apples-to-apples comparisons about their credit card options. The tool provides unbiased, comprehensive data for more than 500 cards, and the data is available to everyone. [USA Today]
Despite APRs That Can Top 30%, Some Shoppers Still Like Retail Credit Cards Over Buy Now, Pay Later Plans
High interest rates aren’t deterring many shoppers from store credit cards. When asked to choose between a store card or a buy now, pay later plan, 58% of surveyed shoppers prefer store cards, according to a new report by LendingTree. The remaining 42% picked BNPL loans. Younger shoppers have been early adopters of BNPL, and that shows in their payment preferences. About 59% of Gen Zers and 51% of millennials prefer BNPL over retail store credit cards, Lending Tree found. To compare, 38% of Gen Xers and 22% of baby boomers prefer BNPL. [CNBC]
Visa Direct to Deliver Faster Bank Transfers in a Minute or Less
From next April, the payment giant’s Direct real-time money movement platform will enable consumers, businesses and governments to deposit funds to bank accounts linked to eligible debit cards in under 60 seconds. Visa Direct reaches 99% of bank accounts in the U.S., and over 11 billion endpoints including cards, accounts and digital wallets around the world. Visa cites a host of use cases, including splitting a bill with friends, moving money between accounts, receiving an insurance claim payout or accessing earned wages. [FinExtra]
Visa Spots Tripling of Fraud over Holiday Weekend
During the Thanksgiving holiday shopping weekend this year, from Nov. 29 to Dec. 2, Visa observed the number of suspected fraudulent transactions triple globally relative to the same shopping period last year. Visa attributed the spike in worldwide fraud partly to criminals adopting artificial intelligence technology to execute their schemes. For Cyber Monday, on Dec. 2 this year, Visa said it blocked 85% more attempted fraudulent transactions than on that Monday last year. [Payments Dive]
Mobile’s Growing Role in Holiday Shopping
Consumers aren’t just using their phones to research products they see on TV, they’re using them to make purchases. 77% of smart TV owners said they frequently make mobile purchases based on TV ads they see, according to a recent study by Samsung Ads. This behavior will carry through the rest of the holiday season as Salesforce forecasts a high volume of mobile shopping. 83% of web traffic and 76% of online purchases will be driven by mobile from December 23 to 25, Salesforce predicts. [MarTech]
Mobile Payments Used to Be Less ‘Painful’ than Using Cash. That Might Be Changing
The “pain of payment effect”, the psychological discomfort of parting with money in the moment of paying, when associated with cash has been attributed to its physical and tangible characteristics in comparison to credit card payment. It has even been suggested that when payment and consumption happen within a short space of time and paying with cash is more material and visual, the pain of paying clouds the enjoyment of consumption. In fact, the use of physical cash has been shown to activate the pain center in the brain. Mobile payment has also been found to affect spending in a similar way to using credit or debit cards. That is, spending tended to be higher when using mobile payments than cash. However, later studies have found this effect between cards or mobile payment and cash becoming weaker with time, suggesting that this may be because consumers have become more used to non-cash payment methods. [The Conversation]
Listen Up, Businesses! Time’s Running Out to Claim Your Share of a $5.5 Billion Settlement
Businesses still have time, but not a lot, to claim their part of a $5.5 billion class-action settlement stemming from Visa and Mastercard’s alleged fee overcharges. The deadline to file a claim is Feb. 4, extended from Aug. 30. Any nonprofit or business is eligible to file a claim if it accepted Visa and/or Mastercard credit or debit payments between Jan. 1, 2004, and Jan. 25, 2019. This includes businesses that have since closed or gone bankrupt. The settlement was a result of a long-running antitrust case in which the two credit card network giants allegedly overcharged merchants by exacting excessive interchange fees, also called swipe fees. [USA Today]