Credit Sesame’s personal finance news roundup February 24, 2024. Stories, news, politics and events impacting personal finance during the past week.

  1. Credit cards lead to rise in delinquencies
  2. Credit cards from large banks are more expensive than those from smaller issuers
  3. German central bank says their country is probably in a recession
  4. US companies show cost-cutting trend
  5. Capital One announces Discover acquisition
  6. 2023 saw the most work stoppages in more than 20 years
  7. Mortgage rates continue to leap higher in reaction to inflation
  8. Home sales finally perk up

Credit cards lead to rise in delinquencies

Late payments continued to rise for most forms of consumer credit in January 2024, led by credit card accounts. Delinquency rates rose for credit cards, auto loans, and mortgages, though they declined slightly for personal loans. The percentage of credit card accounts that are 30 days or more overdue has now increased for eight months in a row. One positive sign is that average credit card balances declined slightly last month, though this may explain why retail sales fell sharply in January. There is an extreme split in delinquency problems between prime and subprime credit card accounts. Serious delinquency (90 days or more overdue) rates for prime customers remain near zero, while those for subprime customers are now 21.22%. See report at TransUnion.com.

Credit cards from large banks are more expensive than those from smaller issuers

The Consumer Financial Protection Bureau (CFPB) found a significant difference in credit card interest rates and fees based on the issuer’s size. The CFPB found that the 25 largest credit card issuers charge rates that are 8 to 10 basis points higher than small or medium-sized institutions. 9 of these 25 large issuers have at least one product with a 30% or higher credit card rate. The CFPB estimates that these rate differences could cost customers of larger credit card companies an extra $400 to $500 a year in interest charges. Larger issuers are also more likely to charge annual fees. 27% of credit cards from large firms have an annual fee, compared with just 9.5% of those from small issuers. The average annual fee from large issuers is $157, compared with $94 for credit cards from small issuers. See details at ConsumerFinance.gov.

German central bank says their country is probably in a recession

The Bundesbank, which performs functions in Germany similar to those of the Federal Reserve in the United States, reported that Germany appears to have entered an economic recession. The central bank reported that Germany’s growth has been flat to negative for four consecutive quarters. It said consumers have been cautious about spending, while higher interest rates have made businesses reluctant to invest. Germany is Europe’s largest economy. On the heels of last week’s news that the United Kingdom and Japan are also in recessions, a picture of weak global demand in 2024 is emerging. See article at Reuters.com.

US companies show cost-cutting trend

Several major US employers have recently announced layoffs and other cost-cutting measures. Nike, Mattel, and JetBlue are among the corporate giants cutting jobs. Macy’s is closing some store locations, United is eliminating some in-flight meals and auto makers are reducing investments in electric vehicles. The trend is reportedly due to inflation fatigue among consumers. With Americans no longer willing or able to pay fast-rising prices, companies are looking to rein in those prices by cutting costs. See article at CNBC.com.

Capital One announces Discover acquisition

Capital One plans to buy Discover Financial Services in a deal worth $35 billion. Discover shareholders will receive Capital One stock in exchange for their current stock. Capital One and Discover are two of the largest non-bank credit card issuers. Analysts say the acquisition may give Capital One more power to compete with dominant payment giants MasterCard and Visa. However, the deal still requires regulatory approval, which may be contentious. See article at ABCNews.com.

2023 saw the most work stoppages in more than 20 years

The Bureau of Labor Statistics reported that more labor disputes led to major work stoppages last year than in any year since 2000. There were 33 major work stoppages in 2023, roughly twice the average of 16.7 over the past 20 years. Work stoppages are typically signs that workers feel they have the bargaining power to risk a strike. Tellingly, 86.7% of last year’s work stoppages were in the service sector, which indicates the general labor shortage for service jobs. A higher number of work stoppages may be good news for worker wages, though it also creates more inflation pressure. See news release at BLS.gov.

Mortgage rates continue to leap higher in reaction to inflation

For the second consecutive week, 30-year mortgage rates jumped by 0.13%. That puts rates at 6.9%, the closest they’ve been to 7% since mid-December. 15-year mortgage rates were up even more sharply, rising by 0.17% this week and by 0.39% over the past two weeks. 15-year rates are now at 6.29%. The sudden rise in mortgage rates is in reaction to last week’s Consumer Price Index and Producer Price Index reports, which show inflation is proving more persistent than previously thought. See mortgage data at FreddieMac.com.

Home sales finally perk up

According to the National Association of Realtors, existing home sales rose by 3.1% in January. This bucks a longer-term trend that has seen home sale volume decline. It remains to be seen whether the revival of sales can survive the steep increase in mortgage rates since the end of January. See press release at NAR.Realtor.

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