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Personal Finance Weekly News Roundup August 20, 2022

Weekly Personal Finance News Recap - AUGUST 20, 2022

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Credit Sesame’s personal finance weekly news roundup August 20, 2022. Stories, news, politics and events impacting the personal finance sector during the last week.

  1. Oil prices drop sharply as Chinese economy struggles
  2. U.S. pharmaceutical costs soar to new heights
  3. CFPB puts credit card companies on notice about interest rates
  4. Consumers are more optimistic about the economy
  5. Import prices show easing inflation pressure
  6. Bank of America overdraft fees drop by 90%
  7. New study shows high cost of weak credit for home buyers
  8. Consumer default rates still rising
  9. Home sales and price declined in July 2022

1. Oil prices drop sharply as Chinese economy struggles

Oil prices reacted negatively to news that the Chinese economy slowed in July. Strict anti-COVID lockdown measures are restricting economic activity in parts of China. The country is also suffering from concerns over a potential financial crisis brought on by a property boom that has turned sour. The impact of China’s economic woes on oil prices stems from the fact that China is a huge importer of oil. A slowing economy in China is considered likely to result in less demand for oil. This may come as some relief to consumers in other countries, who have been suffering due to a spike in oil prices over the past couple years. See full article at Reuters.com.

2. U.S. pharmaceutical costs soar to new heights

A new study found that the annual cost of recently-launched prescription drugs jumped significantly this year. Analysis by the Reuters news agency found that the 13 drugs approved this year by the Food and Drug Administration for treatment of chronic conditions had an average annual cost of $257,000. A separate study last year showed that the annual cost of recently-launched prescription medicines was $180,000. These high costs demonstrate the pricing power that drug companies have. The pending Inflation Reduction Act is intended to reduce some of that pricing power by allowing Medicare to directly negotiate prescription drug prices. See full article at Reuters.com.

3. CFPB puts credit card companies on notice about interest rates

The Consumer Finance Protection Bureau (CFPB) released an analysis that shows credit card rates have risen more than conditions would seem to justify. Credit card rates have risen by more than the bank prime rate. They also rose even when credit card default rates were declining. Charging higher rates than is justified by economic conditions can boost credit card company profit margins. In releasing the study, the CFPB stated that it plans to examine whether some credit card companies are using anti-competitive practices to get away with higher interest rates. See full post at consumerfinance.gov.

4. Consumers are more optimistic about the economy

The influential University of Michigan survey of consumer sentiment showed an improving outlook for the economy’s future. The overall Index of Consumer Sentiment has now risen for two consecutive months. However, those improvements come after the Index hit an all-time low in June. Also, while expectations for the future rose significantly this month, the assessment of current conditions actually declined. This suggests that consumers expect the economy to improve, but don’t see it happening just yet. See the full survey results a UMich.edu.

5. Import prices show easing inflation pressure

While stories about inflation have been a recurring nightmare for consumers this year, the news has been a little better recently. The latest hint that inflation may have peaked came from a Bureau of Labor Statistics report on import prices. After rising during every month in the first half of this year, import prices declined by 1.4% in July. While a 7.5% decrease in fuel import prices was the leading reason for July’s overall decline, the average of all other import prices declined as well. See full release at BLS.gov.

6. Bank of America overdraft fees drop by 90%

One of the nation’s largest banks showed just how dramatically overdraft fees have changed in recent months. Bank of America announced that its total overdraft fees fell by 90% over the past year. The bank reduced overdraft fees from $35 to $10 per occurrence, and eliminated fees for bounced checks. Many other banks have reduced overdraft fees over the past year, and some have eliminated them altogether. Consumers can benefit from these savings by using a bank with no overdraft fees. See full article at USNews.com.

7. New study shows high cost of weak credit for home buyers

A study by real estate information website Zillow illustrates the cost of having a mediocre credit rating. According to the study, someone with excellent credit could qualify for a 5.099% 30-year fixed rate mortgage in today’s market. Someone with just a fair credit score would pay 6.688% on the same loan. Based on a typical U.S. home priced at $354,165, that difference would cost the person with fair credit an extra $288 per month. Over the life of the mortgage, the difference would total $103,626. See full story at USNews.com.

8. Consumer default rates still rising

The S&P/Experian Consumer Default composite index rose for the eighth consecutive month in July. The index measures the percentage of consumers that are not keeping up with payments on credit accounts. The index includes bank card accounts, mortgages and auto loans. The default rate on bank cards fell in July, while defaults for mortgages and auto loans rose. See full release at PRNewsWire.com.

9. Home sales and prices declined in July 2022

The National Association of Realtors reported that both the number of home sales and the average price of homes sold declined in July. Sales volume was down 5.9% for the month, and is 20.2% lower than a year earlier. The median sale price of existing homes fell by 2.4% during July. That median price is still up 10.8% from a year earlier, but the recent decline in sales and prices suggest that market conditions are starting to take a toll. The combination of a boom in prices over the past couple years plus this year’s spike in interest rates has priced many buyers out of the market. See full release at NAR.Realtor.

Weekly News Headlines from Credit Sesame

Richard Barrington
Financial analyst for Credit Sesame, Richard Barrington earned his Chartered Financial Analyst designation and worked for over thirty years in the financial industry. He graduated from St. John Fisher College and joined Manning & Napier Advisors. He worked his way up to become head of marketing and client service, an owner of the firm and a member of its governing executive committee. He left the investment business in 2006 to become a financial analyst and commentator with a focus on the impact of the economy on personal finances. In that role he has appeared on Fox Business News and NPR, and has been quoted by the Wall Street Journal, the New York Times, USA Today, CNBC and many other publications.

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