Credit Sesame’s personal finance weekly news roundup May 20, 2023. Stories, news, politics and events impacting the personal finance sector during the last week.
- BoA shows slower credit card spending
- Bigger banks to bear the brunt of restoring FDIC fund
- CFPB warns about medical credit cards
- Consumers see less spending ahead
- Credit card borrowing may finally have hit a wall
- Homeowners reluctant to put properties on the market
- Job openings decline for a third straight month
- Housing market continues to weaken
1. BoA shows slower credit card spending
Bank of America (BoA) reported that household credit card spending declined by 1.2% in April compared with a year earlier. BoA is one of the largest banks in the U.S., and the year-over-year decline in credit consumer credit card use was the first such downturn since February of 2021. BoA economists expect that this dip in credit card use indicates that retail sales slowed during April. See article at BusinessInsider.com.
2. Bigger banks to bear the brunt of restoring FDIC fund
The cost of covering uninsured deposits that would have been lost due to recent bank failures will be borne by banks that have $5 billion or more in assets, according to a new FDIC proposal. This size group represents roughly the largest 6% of U.S. banks. In an effort to halt panic over bank failures, the FDIC had announced that it would cover even those deposits that exceeded the $250,000 deposit limit. The FDIC estimates that providing this added protection cost its insurance fund an extra $15.8 billion. Banks with more than $5 billion in assets will be assessed a special fee 0.125% a year for the next two years, based on the value of uninsured deposits they held as of December 31, 2022. See announcement at FDIC.gov.
3. CFPB warns about medical credit cards
The Consumer Financial Protection Bureau (CFPB) has issued a new report highlighting concerns about the growing use of medical credit cards. The CFPB notes that use of these credit cards has grown quickly as they are now often aggressively marketed by medical professionals to patients who are in distress. Among the CFPB’s concerns with these products include their high interest rates, the fact that they are often used when insurance coverage should have been available, and the higher likelihood that consumers with lower credit scores will have to pay interest under the payment terms for these cards. See report at ConsumerFinance.gov.
4. Consumers see less spending ahead
Consumers surveyed in April expected household spending to increase by 3.4% over the next year. This is according to the Federal Reserve Bank of New York’s quarterly Household Spending Survey. The 3.4% figure is down from 4.0% expected spending growth as of last December, and represents the lowest rate of expected spending growth since December of 2020. Plans for reduced spending growth may be a sign that the economy is slowing, though on the bright side they may also represent a recognition that inflation has started to ease. See report at NewYorkFed.org.
5. Credit card borrowing may finally have hit a wall
Credit card debt, which had been growing at an even faster pace than consumer debt in general, was unchanged in the first quarter of 2023. The Federal Reserve Bank of New York’s Quarterly Report on Household Debt and Credit showed that credit card balances remained stable at $986 billion in the first quarter. In contrast, all other categories of consumer debt increased in the first quarter. This includes mortgages, auto loans, home equity loans and student loans. Overall, consumer debt rose by $148 billion in the first quarter, to reach a new record of $17.05 trillion. See report at NewYorkFed.org.
6. Homeowners reluctant to put properties on the market
Realtor.com reports that there are 21.3% fewer homes on the market in April than a year earlier. The decline in properties available for sale is attributed to higher mortgage rates. Higher rates discourage home sellers in two ways. First, with more buyer dollars going towards higher interest rates, sellers may not be able to get the prices they had envisioned. Second, sellers who were planning to buy a different home now don’t want to trade their old, low-rate mortgages for newer high-rate ones. See article at Yahoo.com.
7. Job openings decline for a third straight month
The number of job openings declined by 384,000 in March. That was the third straight month in which job openings declined, and continues a trend that has seen job openings decline generally since peaking in March of last year. Over the past year, job openings have declined by a total of 2,437,000. The fall-off in job openings is pretty widespread geographically: in March of 2023, the percentage of job openings declined in fifteen states while increasing in only one. Job openings were more or less unchanged in the remaining states. While too much of a decline in job openings could signal a weakening economy, there are still far more job openings than people looking for work. A reduction of unfilled positions could help ease inflation pressures. See report at BLS.gov.
8. Housing market continues to weaken
Existing home sales declined by 3.4% in April, and are down by 23.2% from a year ago. The number of houses available for sale rose by 7.2% in April. Unsold homes represent a 2.9 month supply at the current rate of sales, up from 2.6 months in March and 2.2 months a year ago. Given these signs of market weakness, it’s not surprising that the median sale price slipped by 1.7% from a year ago, to $388,000. The slowdown in home sales was steepest in the West, where volume fell by 6.1% in the month of April and by 31.3% over the past year. See release from NAR.realtor.