Credit cards increase as consumers struggle with financial problems | So Good News
More information: All US credit card transactions hit $916 billion in September – reaching pre-pandemic levels for the first time, according to Equifax data cited by the Wall Street Journal. The levels in September reflected the levels of December 2019 and were 23% higher than their peak in April 2021.
What is fish? Although credit card banks have stabilized, card issuers must remain vigilant as economic uncertainty is cutting into consumers’ budgets.
- Consumers are carrying more debt. Sixty percent of US respondents with credit card debt have debt he carried it for a year-up from 50% a year ago, according to a CreditCards.com survey. Smaller and lower-income consumers tend to have more credit card debt for essentials like groceries, the study found.
- Consumers are leaning towards credit cards as inflation rises. The Personal Consumption Expenditures (PCE) price index increase 5.1% year-on-year (YoY) in September—remaining the highest since the early 1980s. Forty-eight percent of UK, US, and Australian respondents in a Marqeta training they said their credit cards have become a “lifeline” for them as the cost of living rises. Sixty-seven percent of US respondents said they use their cards to make ends meet.
- Consumers’ savings rate has fallen. The US interest rate as a share of disposable income fell to 3.3% in Q3—the lowest reading since the 1940s, according to Bureau of Economic Analysis data cited by the Journal. In Q1 2020, this figure stood at 9.6%.
How we got here: Ours Forecasting the number of credit card transactions shows a significant change in consumer spending throughout the pandemic.
- The first epidemic pullback. Many consumers cut back on their credit cards at the start of the pandemic as financial panic grew. The total number of US credit cards grew by 0.6% YoY in 2020, at ours predictions.
- Post-Lockdown benefits. Stimulating government payments, lower unemployment, and easing of COVID-19 restrictions gave consumers confidence to pick up their credit cards again. US credit card transaction volume last year rose 21.5% YoY, pa ours predictions.
What’s next? We highlight the challenges that donors will face in the financial crisis and how consumers will react in our lives Uncertain Times: Credit Cards report.
- Short term. A recession can cause the cost of a credit card to drop. Issuer losses should rise as consumer credit risk increases.
- Long time. Buy now, pay later (BNPL) could steal more market share from credit cards as consumers look for flexible and interest-free payment options. Credit card rewards can change to match your daily spending habits.
Providers may need to adhere to roaming and non-payment terms, emphasize payment flexibility, and add financial management tools to help consumers and minimize their losses.