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Personal Finance Weekly News Roundup July 30, 2022

Weekly Personal Finance News Recap - JULY 30, 2022

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Credit Sesame’s personal finance weekly news roundup July 30, 2022. Stories, news, politics and events impacting the personal finance sector during the last week.

  1. The Fed hikes interest rates again
  2. U.S. economy shrank during the second quarter
  3. Credit card and phone companies show warning signs
  4. The number of Americans struggling to pay bills surges
  5. Businesses get a warning about credit card surcharges
  6. Consumer confidence declines for a third straight month
  7. Senate bill targets merchant fees on credit cards
  8. Mortgage rates fell last week

1. The Fed hikes interest rates again

The Federal Open Market Committee concluded its July meeting by announcing a 0.75% increase in the Fed funds rate. This key banking interest rate affects the interest rate on a variety of consumer products. The Fed’s latest rate increase was the fourth this year, for a total rise of 2.25%. The Fed funds rate is now being maintained in a target range of 2.25% to 2.50%. It started the year near 0%. The Fed may not be finished raising rates as it continues to fight inflation. At the same time, the Fed will keep a wary eye on the job market to make sure higher interest rates are not causing unemployment to rise. See full Fed statement at FederalReserve.gov.

2. U.S. economy shrank during the second quarter

The Bureau of Economic Analysis announced that U.S. GDP contracted during the second quarter of 2022, after adjustment for inflation. The U.S. economy declined at a real annual rate of 0.9% during the second quarter. This follows a decline at a real annual rate of 1.6% in the first quarter. Contrary to a popular misconception, two consecutive quarters of economic contraction does not automatically signal a recession. The National Bureau of Economic Research, which officially measures expansions and contractions, takes into account the length, breadth and depth of economic declines. Given the shallowness of the declines in the first and second quarters, it may be too early to label this a recession. See GDP release at BEA.gov.

3. Credit card and phone companies show warning signs

Earnings reports from some credit card and wireless providers are showing signs of consumer weakness. Discover and Capital One both reported disappointing earnings due in part to higher consumer delinquency rates. That means more people are failing to pay their credit card bills on time. Both card companies increased their reserves for credit losses going forward, a sign of growing concern about consumer finances. Meanwhile AT&T reported that customers are paying their bills more slowly, and Verizon said consumer usage volume was down. See article at CNN.com.

4. The number of Americans struggling to pay bills surges

An analysis of a recurring U.S. Census survey shows that the percentage of Americans who are having trouble meeting routine expenses has risen alarmingly over the past year. The latest survey, from late June and early July of this year, showed that 40% of respondents said they were having trouble meeting normal household expenses. The number from the corresponding period last year was just 27.1%. Projecting those percentages onto U.S. population figures indicates that the number of families who can’t keep up with expenses has risen from 60 million to 90 million in just the past year. The Census Bureau began taking this survey back in 2020 to measure the impact of the COVID pandemic on American families. The 40% of people struggling to pay their bills is the highest since the survey began. See full article at Bloomberg.com.

5. Businesses get a warning about credit card surcharges

In today’s inflationary environment, surcharges are popping up on a lot of bills. These are an annoyance to consumers, but some businesses have been treating them as an opportunity. The New Jersey Division of Consumer Affairs recently sent letters to 14 businesses reminding them that such surcharges must be fully disclosed before the customer places an order. The New Jersey consumer advocate also had important advice for consumers no matter where they do business. The fees credit card companies charge businesses when their cards are used are typically between 1% and 5%. If you see a credit card surcharge higher than that, the business isn’t just recouping expenses – it’s adding a little extra profit. See full article at NJ1015.com.

6. Consumer confidence declines for a third straight month

The Conference Board announced that its Consumer Confidence index declined in July. The rate of decline was slight, but marked the third straight month in which consumers grew less optimistic about the economy. Both consumers’ assessment of current conditions and their expectations for the future declined in July. The Expectations Index is well below the level of 80, which indicates a risk of recession. Dampened consumer expectations can become a self-fulfilling prophecy, as pessimism causes people to hold off on spending plans. See full release at Conference-Board.org.

7. Senate bill targets merchant fees on credit cards

A bipartisan bill has been introduced that is designed to save merchants money on the fees they pay for processing credit card transactions. Senators Dick Durbin and Roger Marshall have introduced a bill that would allow merchants to choose among competing networks for credit card processing. The hope is that this competition would result in lower processing fees. Typically, this kind of rule benefits merchants more than consumers, since merchants get the savings without lowering the prices they charge. See article at MarketWatch.com.

8. Mortgage rates fell last week

Despite the Fed’s rate increase, mortgage rates actually declined over the past week. 30-year mortgage rates dropped by 0.24%, to 5.30%. 15-year and adjustable rate mortgages showed milder declines. The move is a reminder that long-term rates like mortgages can move independently of short-term rates like the Fed funds rate. The decline in long-term rates is a sign of confidence that the Fed’s moves will succeed in calming inflation. See rate information at FreddieMac.com.

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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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