What the U.S. Credit Downgrade Means for the Economy, Your Finances
A rating agency downgraded U.S. credit for the second time in the nation’s history on Tuesday, sounding an alarm with implications for the economy and everyday people’s finances if U.S. debt continues to grow. Fitch Ratings lowered the country’s credit rating to AA+ from AAA, citing the ballooning U.S. debt load and a weakening of governance. On top of that, Fitch expects the U.S. to enter a recession later this year. Analysts downplayed the immediate economic effect of the rating decision but said it marks a significant milestone on a path of increasing debt that could ultimately raise the nation’s borrowing costs, threaten economic growth and hike interest rates for consumer loans like credit cards and mortgages. [ABC News]
American Express Partners with Skipify to Enhance Checkout Process
American Express has teamed up with Skipify to streamline the checkout process for its customers. Skipify allows Amex customers to link their eligible cards to participating merchants, eliminating the hassle of manual data entry. Through the partnership, Skipify is able to identify Amex customers via their email addresses, and automatically preloads their checkout with all of their information. The partnership underscores a fundamental principle: reducing friction is vital to a company’s bottom line. When customers encounter a seamless and efficient checkout process, they are more likely to complete their purchase, leading to reduced cart abandonment rates and increased revenue for merchants. [Payments Journal]
Number of Consumers Who Feel They Are Target for Fraud Is Up From One Year Ago
More than half of consumers feel they’re more of a target for fraud than a year ago. According to a new Experian report, “consumers and businesses alike are keeping fraud and security top of mind amid uncertain economic conditions with nearly two-thirds of people surveyed reporting they’re very or somewhat concerned with online security.” Consumers’ top concerns include identity theft (64%), stolen credit card information (61%) and online privacy (60%). [CU Today]
Bodegas Put on Notice as Visa Fights Back on Card Surcharges
The world’s largest payment network is making changes to how it deals with merchants who want to charge customers extra when paying with a credit card. In recent months, Visa lowered the maximum amount retailers can charge consumers using the firm’s cards. The company has also started sending in-person auditors to ensure stores are complying with its rules when levying such surcharges. Visa’s moves come as a growing number of small businesses say they’re feeling pinched by the fees they pay to banks to accept electronic payments. They’ve increasingly turned to card surcharges as a way to cover those costs, which are also known as interchange fees. [Bloomberg]
The Federal Reserve Could Help Instant Payments Catch On
The Federal Reserve gets a lot of attention when it comes to its interest rate decisions. Recently, its role as a bank regulator grabbed the spotlight too, after the wave of bank failures earlier this year. But the Federal Reserve also manages more than $5 trillion worth of payments that banks make every day. A couple of weeks ago, the Federal Reserve launched FedNow, a new payment service that’s meant to modernize the payment system by letting people send and receive money instantly, instead of having to wait two or three days for a payment to clear. The thing is, if a customer wants to use the Fed’s new service, their bank has to sign up. And so far, only about a couple dozen have. [Marketplace]
TikTok to Launch E-Commerce Program to Bring Chinese Goods to the U.S.
TikTok plans to launch a program in August to help Chinese merchants sell goods globally, and will officially roll it out first to consumers in the United States, a person familiar with the matter said. Seeking to replicate the success shopping platforms like Shein and PDD Holdings’ Temu have had in the U.S., the Chinese-owned short-video platform will provide a suite of services ranging from storage to shipping to merchants in China to help them sell in the United States. [Reuters]
Apple Card’s Savings Account Tops $10 Billion in Deposits in 15 Weeks
Less than four months after Apple launched a high-yield savings account for Apple Card customers, it’s reached more than $10 billion in deposits, Apple announced Wednesday. Users must have an Apple Card to access a savings account through Apple’s banking partner Goldman Sachs, which made the feature available in mid-April. Nearly all customers, or 97%, have opted to automatically send card rewards they earn with each purchase directly to the associated savings account, which pays 4.15%. [American Banker]
Bank of America Class Action Claims Company Refuses to Pay Sign-Up Bonuses to Credit Card Applicants
Plaintiff Daniel Christensen filed a class action lawsuit against Bank of America claiming the bank advertised a sign-up bonus for starting a credit card, but then never paid out those bonuses. New Bank of America credit card customers spent the set amount during the set period of time required for the sign-up but then were never paid the bonus, the Bank of America class action claims. Bank of America did not honor the bonus for those who signed up for the credit cards either in-person or via telephone did not receive the bonus. [Top Class Actions]
Block Sues Mastercard and Visa Alleging Inflated Merchant Fees
Block is accusing payment-card networks and their member banks of charging inflated fees and using their market power to sustain anticompetitive practices. Block alleges in a lawsuit filed July 14 that member banks involved with each network colluded to sustain network fees, called interchange, at a level above what would be tolerated in a competitive market. The complaint cites an “Honor All Cards” policy that requires merchants to accept all cards, regardless of the issuing bank, on the Visa or Mastercard networks. Since merchants are not allowed to pick and choose which cards they accept, the issuing banks do not compete to win the favor of merchants, according to the suit. Member banks agree to default fees set by Visa and Mastercard so they are not incentivized to undercut each other on price and instead benefit from inflated fees, the suit argues. As a result, there are no forces driving interchange fees down and merchants have few options for avoiding them. [Forbes]
Elon Musk Said Credit Card Debt in the U.S. is ‘Looking Scary’ Right Now
Credit card debt is at an all-time high in the United States, and the world’s wealthiest person is speaking out about it. Elon Musk recently weighed in on people’s struggles to make ends meet in the current economic climate. “For a lot of people, they’re just really breaking even every month,” Musk said. “In fact, if you look at the rise in credit card debt, they are, in fact, not breaking even every month. Credit card debt is looking scary.” In this case, Musk isn’t wrong. The boom-bust cycle of the pandemic economic recovery has hit a new snag, with Americans spending much more than they might actually be able to afford. [Business Insider]
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