CardRates.com Weekly Credit Card Update — August 6, 2021

For media inquiries on these stories and more, contact credit card expert and industry analyst Bill Hardekopf at (205) 985-9725 or billh@cardrates.com.

The coronavirus pandemic unequivocally placed Americans under economic and social strain. However, arguably the most impactful stress many people felt was within their finances. In fact, according to a new survey, more than half of Americans (62%) said that their credit card debt increased compared to before the global pandemic began.

Additionally, 52% of respondents said that they increased their credit limits to support their increase in spending. But even as debt rises, cardholders’ spending habits are not slowing down, and overall sales are increasing in many industries. In June, the Consumer Price Index from the U.S. Bureau of Labor Statistics surged 0.9%.

• Story By: Kelsey Ramirez, Fox Business

Senate Democrats are making a big push for new legislation that would stop consumers from paying sky-high interest rates on small loans, with APRs of more than 600% in some cases. 

In an effort to prevent consumers from ending up in payday-loan debt traps where they renew small loans over and over-paying more in fees over time than the original loan amount — Senate Democrats reintroduced legislation that would cap consumer loan interest rates at 36%. The bill, dubbed the Veterans and Consumers Fair Credit Act, builds on the Military Lending Act enacted in 2006, expanding the 36% interest rate cap to all consumer loans, including payday and installment loans. 

• Story By: Megan Leonhardt, Fortune

A new Federal Reserve report shows that household debt jumped by the most in 14 years in Q2, mostly due to the housing market and mortgages. Consumers pulled off a debt surprise during the pandemic year, paying down credit cards and avoiding falling into delinquency, unlike prior recessionary periods.

Credit card debt is rising again, and bank and card company CEOs say the consumer is still very healthy, but there are signs that the level of financial responsibility exhibited during the pandemic won’t last.

• Story By: Eric Rosenbaum, CNBC

Citi Australia is getting into the buy now, pay later market with its new product called Spot, which is being issued by company subsidiary Diners and will officially launch in October. The card can be used online or in-store anywhere Mastercard is accepted worldwide and allows users to split payments for merchandise into four interest-free installments.

Citi customers can pre-register for Spot before it is publicly rolled out. Retailers can also sign up in advance for partnership opportunities.

• Story In: PYMNTS

As Democrats work to eradicate overdraft fees, some banks are retooling their overdraft policies or eliminating the fees altogether on their own, moves that could help lower-income Americans save money. In June, Ally announced it was getting rid of overdraft fees, while last month Synovus Financial said it’s looking to rely less on those fees for its checking accounts.

They follow PNC, TD Bank, Fifth Third, Huntington Bancshares, and Regions Financial, all of which earlier this year limited overdraft fees by introducing new accounts or services or curbing when the fees are assessed. Their efforts come as Democrats push the Overdraft Protection Act, which would prevent institutions from reordering transactions to increase fees and would limit overdraft charges to one a month or six a year.

• Story By: Marissa Gamache, Yahoo Money

Payments services provider Square announced it was acquiring Afterpay for approximately $29 billion in stock. The deal is an all-stock transaction. Afterpay is one of the leaders in the growing “buy-now, pay-later” space.

Founded in 2014, Afterpay allows consumers to buy and receive an item immediately with only a 25% upfront cost. The remainder of the purchase price is paid, interest-free, over the next six weeks in four equal payments. Customers with late payments are not allowed to use the app for another purchase until the debt is settled, but Afterpay notes that this prevents customers from running up large debt as occurs with credit cards.

• Story In: Yahoo Finance

PayPal is facing probes from both the SEC and the CFPB. The SEC is investigating whether the swipe fees paid to the banks that issue PayPal’s debit cards are consistent with Federal Reserve guidelines, the company said in its quarterly regulatory filing.

The agency is also investigating how PayPal reports marketing fees earned from its branded-card program. PayPal said it received a civil investigative demand from the CFPB in connection to the marketing and use of PayPal Credit in connection with merchants that provide educational services. 

• Story By: Jennifer Surane, Bloomberg

Retail sales in July got a big boost from the Child Tax Credit and pent-up consumer demand, posting their 11th consecutive month of growth. U.S. retail sales (excluding auto and gasoline) rose 10.9% in July over the year-ago period, and nearly quadruple the average growth in the month of July.

Brick-and-mortar stores are rebounding, with in-stores sales making up 81.9% of total retail sales for the month, according to Mastercard SpendingPulse, which measures in-store and online retail sales across all forms of payments.  In-store sales rose 15.5% year-over-year in July, with weekends having positive spikes in spending as shoppers returned to physical stores.

• Story By: Marianne Wilson, Chain Store Age

The coronavirus greatly accelerated the adoption of digital banking technology among consumers, and those habits have taken root, according to a JPMorgan Chase survey. 

In the second quarter of 2021, Chase reported almost 57 million “digitally active customers,” an increase of 10% year-over-year, and nearly 43 million customers used the company’s mobile offerings, which also constitutes a 10% increase YoY. According to Chase’s Q2 2021 earnings call, total digital transactions per customer grew 12% over the past year.

• Story By: Robin Bradley, Banking Dive

Sen. Elizabeth Warren urged Treasury Secretary Janet Yellen to identify and remedy risks posed by cryptocurrencies and to craft a “comprehensive and coordinated” framework through which federal agencies can continually regulate virtual coins.

Warren cited five risks posed by an underregulated crypto market: exposure to hedge funds and other investment vehicles that lack transparency; risks to banks; unique threats posed by stablecoins; use in cyberattacks that can disrupt the financial system; and risks from decentralized finance.

• Story By: Thomas Franck, CNBC

PayPal’s plan to morph itself into a “super app” has been given a go for launch. According to PayPal CEO Dan Schulman, the initial version of PayPal’s new consumer digital wallet app is now “code complete.” Over the next several months, PayPal expects to be fully ramped up in the U.S., with new payment services, financial services, commerce and shopping tools arriving every quarter.

The company has spoken for some time about its “super app” ambitions, a shift in product direction that would make PayPal a U.S.-based version of something like China’s WeChat or Alipay or India’s Paytm. Like those apps, PayPal aims to offer a host of consumer services under one roof, beyond just mobile payments.

• Story By: Sarah Perez, TechCrunch

One of the best credit card programs just got significantly better. Chase Ultimate Rewards points — which are earned on credit cards such as the Chase Sapphire Reserve, the Chase Sapphire Preferred Card and the Ink Business Preferred Credit Card — can now be transferred to Air Canada’s Aeroplan frequent flyer program.

Points in the Aeroplan program can be redeemed for flights not only on Air Canada itself but any of the carrier’s 40 airline partners, which include United, Lufthansa, Scandinavian Airlines, Turkish Airways, Tap Air Portugal, Avianca, Copa Airlines, All Nippon Airways, EVA Air and many more.

• Story By: Jennifer Yellin, CNN

Open-loop prepaid cards are undergoing rapid adoption in niche Canadian markets, despite nearly all Canadians having an existing banking relationship. The two most notable areas of growth are the gig economy, where contractors can receive wages on a prepaid card; and neobanks, where younger consumers are signing up for app-based prepaid accounts.

Remote aboriginal communities are also adopting prepaid cards to make up for a lack of access to traditional banking services. This growth is happening despite very high banking penetration in Canada. About 99% of Canadians have a bank account.

• Story By: Robin Arnfield, American Banker