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Take On Payments, a blog sponsored by the Retail Payments Risk Forum of the Federal Reserve Bank of Atlanta, is intended to foster dialogue on emerging risks in retail payment systems and enhance collaborative efforts to improve risk detection and mitigation. We encourage your active participation in Take on Payments and look forward to collaborating with you.

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June 7, 2021

Share of Credit Card Revolvers Drops in the Pandemic Year

How do you view your credit card? As a convenient way to make purchases and earn rewards? As a financing tool to spread out the cost of large purchases? As a way to get over rough patches? About half of U.S. consumers with a credit card use it as a means of payment and pay the full balance due every month. The other half use credit cards as a financing tool.

New data releases from the Survey of Household Economics and DecisionmakingOff-site link (SHED) and the Survey of Consumer Payment Choice (SCPC) show that eight in 10 U.S. adults had a credit card in 2020 and, of those, about half carried an unpaid balance at some point during the prior 12 months.

In addition, both surveys found that credit card debt declined from 2019 to 2020. SHED reports that fewer card holders carried a balance, and card borrowers reduced their outstanding balances. Similarly, the SCPC found that that 51.3 percent of card holders carried a balance sometime in the preceding 12 months—the lowest share since 2015. In addition, 51.8 percent of these revolvers reported their balances to be lower than a year ago.

A paper from the Federal Reserve Board of Governors attributes the decline in balances to a sharp decline in credit card transactions at the start of the COVID-19 pandemic in March and April 2020 and also notes a decline in the origination of new credit card accounts at that time. And a New York Fed surveyOff-site link found that about one-third of the value of the first round of stimulus payments under the CARES Act was used to pay down debt.

The SHED survey report indicates that while many borrowers overall reduced their debt, people who were laid off at some point in the past year increased their credit card debt (39 percent compared to 24 percent of those not laid off). This aligns with other research findings that, as the SHED report puts it, “financial challenges in 2020 were uneven.” The New York Fed survey, for example, found that high-income households saved proportionately more of their stimulus payments: 40.8 percent for household income greater than $75,000 compared to 31.2 percent for household income $40,000 or less.

The drop in revolvers could have implications for the use of credit cards going forward, because credit card revolvers are more likely than convenience usersOff-site link to have and use debit cards instead of credit cards, although many other factors—including general economic conditions—will come into play.

June 1, 2021

The Generational Divide in Online Shopping during the COVID Pandemic

Like me, you probably have seen many headlines citing the impact of the COVID-19 pandemic on people in various demographic segments. Take, for example, age:

  • "COVID-19 hurts working mothers"
  • "Millenials slammed by second financial crisis"
  • "COVID pushes out women and boomers"
  • "Pandemic accelerates retirements"

As you can see from these headlines, no generation is unscathed.

How did people of different ages behave during COVID? Preliminary data from the 2020 Survey of Consumer Payment Choice appear to show that in 2020, millennials increased their uptake of new payments habits while boomers were slower to do so.

  • Millennials increased their share of online purchases as a percentage of all purchases by a greater margin than boomers. Boomers’ share of purchases online went from 4 percent in 2019 to 6 percent in 2020. For millennials, online purchases jumped to 21 percent from 13 percent.
  • Millennials continued to expand their enthusiastic reception of payment apps, including Venmo and Zelle.

Of course, many factors, not just COVID, are in play here. These could be a few:

  • Millennials are moving into their prime earning years. For example, they became more likely to have a credit card in 2020. Two-thirds of millennials had a credit card in 2019, and almost 8 in 10 did in 2020.
  • Boomers may be stuck in their habits. Payments choice, like many other consumer behaviors, is a habit and generally slow to change.

You can examine differences in consumer behavior by age using the interactive charts for the 2020 Survey of Consumer Payment Choice at atlantafed.org.

May 24, 2021

Mindfulness Can Ease Payments Stressors

Making a $26 purchase recently, I was surprised when my debit card was declined. My account had money in it, so I couldn't understand what was wrong. Fortunately, I had cash and prepared to pay with it. Then, the clerk pointed to a notice taped to the terminal: "No cash accepted."

Behind me, people were growing impatient, sighing, and shuffling their feet. I tried a credit card I keep for emergencies, and it went through. Relieved to complete the purchase, I left and called the bank. My account was fine; the problem was with the merchant's terminal.

Back in my car, I breathed a sigh of relief but thought about how uncomfortable I felt standing in line, having two payment methods rejected, needing to scramble to find another way to pay, and sensing the impatience of others behind me. I also thought about the alarm I felt when my debit card was declined. Had my account been attacked and emptied by fraudsters? I realized this transaction had triggered a typical stress response: increased heart rate, anxious feelings, sweaty palms, disrupted breathing patterns, all physical and emotional reactions to a simple payment transaction that almost wasn't completed.

May is Mental Health Awareness Month, and it helps to be more aware of any stress we have while making our daily payment transactions. We are all affected by money and need it to function in our daily lives. We often take payments for granted but it's our primary method for getting what we need and want. Money, and conflicts over money, are significant stressors for people. One way to help with stress reduction is mindfulnessOff-site link, the practice of bringing your attention to the present moment, taking a deep breath, and relaxingOff-site link. In this situation, I used mindfulness techniques to reduce the physical and emotional effects I was feeling. I was grateful I had learned these techniques for staying calm and reducing my stress response.

I think about people who are having payments rejected for whatever their circumstances, whether it's due to bank error, merchant error, a fraud alert, or the merchant not accepting a payment type such as cash or check. This can be particularly stressful if you need groceries, a prescription, gas, or emergency supplies and can't get them because either you or the merchant can't complete your transaction due to each one's payment choices or available options.

This in-person point of sale issue has the power to affect you in ways you may not even recognize, causing feelings of shame, embarrassment, anger, and anxiety. Payments inclusion initiatives can address some of these issues. In addition, by simply acknowledging that any of the monetary transactions we make in a day can cause stress, we can increase our awareness of how we respond to help us remain calm and reduce mistakes. When we take a deep breath and a minute to be mindful, we can reduce our body's automatic stress response, which benefits us in other areas of our lives.

May 17, 2021

Common Learnings from Fishing and Phishing

As a youngster growing up in Southeast Georgia, one of my favorite summer pastimes was fishing with my older brother at the local creek using cane poles and some corn niblets or, if we really hit the bait treasure box, pieces of beef hot dog. There is a reason they call it fishing and not catching as most days we barely got a nibble. But there were those days when we would land a nice-sized bluegill.

As I grew older and my fishing opportunities expanded, I began to learn more about the science and techniques of fishing. To increase the catching, there was a level of knowledge needed as to what type of bait (artificial or live) and what fishing technique (bottom, slow, or fast retrieve) to use to target the species of fish I wanted.

I reviewed the FBI's 2020 Internet Crime Report Adobe PDF file formatOff-site link recently and learned that there were more than 240,000 phishing/smishing/vishing/pharmingOff-site link incidents in 2020—an increase of 110 percent over 2019 (and these are just those that were reported). Losses from these incidents were estimated at $54 million. Reading about this made me flash back to my fishing learnings. I reflected that in phishing, as in fishing, there are those people who simply throw out a baited hook to see what bites they get. They blast out a generic email to tens of thousands of email addresses they bought or otherwise acquired illegally, promising fortunes if you only pay, in advance, a finder's fee or the taxes, with gift cards or cryptocurrency. (These messages have advanced over the years to eliminate the poor grammar and misspellings and provide a more believable scenario about the money that belongs to you.)

It has become obvious to me from my research, from seeing the attacks firsthand, and from listening to my colleagues that criminals are becoming more sophisticated in their messages. They are quick to take advantage of current health or natural disaster crises, sending links to “breaking news” that contain malware or links to false websites to capture your personal information or other credentials. They have become very skilled in identifying a target and researching that individual's hobbies or life events through social media, which allows them to craft a message that appears legitimate and appeals to the target's interest.

My colleagues and I are constantly trying to better educate the public about these threats through our posts, webinars and other publications. Just when we think we've seen it all, the criminals come up with a new twist on an old scheme, such as what we saw over the last year regarding the stimulus payments. The bad guys are always going to be out there hoping they can get a nibble from you so they can try to set the hook and reel you in. Don't let yourself be the catch of the day.