Weeks ago, as the coronavirus pandemic worsened, many financial institutions announced programs to help customers facing financial hardships. Most of those programs allow for you to request to delay your payments, and refrain from charging you late fees related to those payments. But one bank charge you may still see…Read more...
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More than 80 percent of the fees were paid by just 9 percent of account holders,...More than 80 percent of the fees were paid by just 9 percent of account holders, according to the Center for Responsible Lending.
In response to the coronavirus, credit card issuers like Amex and Capital One are letting customers skip payments without interest and more
According to a WalletHub survey, 67 million Americans anticipate trouble paying their credit card bills due...According to a WalletHub survey, 67 million Americans anticipate trouble paying their credit card bills due to the economic impacts of the coronavirus. The Apple Card, issued by Goldman Sachs, will allow customers to skip a payment without accruing interest. American Express and Capital One are reportedly offering this assistance to eligible customers as well. If you aren't able to pay your statement balance, call the number on the back of your card to discuss your options. You may find that your bank is willing to offer assistance that it hasn't publicly advertised based on your situation and need. See Business Insider's list of the best credit cards with intro APR offers. Not only has COVID-19 led to a dramatic dip in the stock market, but the coronavirus pandemic has also resulted in both temporary and permanent layoffs. According to a survey by WalletHub, 67 million Americans anticipate difficulties paying their credit card bills because of the coronavirus. Fortunately, most major credit card issuers are responding by offering assistance to their customers. Goldman Sachs, which issues the Apple Card, is allowing customers to skip their March payments (and, now, their April payments) without accruing any interest fees. American Express and Capital One are following suit with similar programs for eligible cardholders. Here's a roundup of how other major US credit card issuers are offering assistance to their customers. If you're not in a position to pay off your credit card balances and you don't see any options for your issuer listed here, you should call the number on the back of your card and explain your situation. Your bank may be willing to come up with a solution such as a payment plan tailored to your specific situation. American Express As reported by Richard Kerr of The Points Guy, Amex will waive interest charges and late fees and offer lower interest rates on a case-by-case basis for those who request assistance. According to The New York Times, American Express will also allow cardholders to skip payments without accruing interest. Don't just skip a payment and expect to see your interest fees waived; if you have a consumer or business Amex card and you're not in a position to pay your statement balance, call the number on the back of your card or log into your account and start a chat. Be prepared to explain how COVID-19 has impacted your financial situation, and note that if Amex account services does offer any financial relief, your accounts will be frozen until they're paid off, and you won't be able to access your Membership Rewards points balance until your accounts are paid off. Additionally, if you booked a trip through Amex Travel and need to change or cancel your reservation, Amex will honor the travel provider's policies. It's also waiving the Amex Travel fee for making flight modifications through April 30, 2020. See the Amex COVID-19 information page for more info. Bank of America Bank of America has a coronavirus help page, which it recently updated to add details about the assistance it's offering to cardholders. If you're not able to make your Bank of America credit card payment on time, you can submit a payment deferral request online. If you have any questions about what other options might be available, call the number on the back of your card. Barclays Barclays is allowing cardholders to request to skip a payment online. If you request this via the online form, you'll be able to skip the minimum payment due on your next two payment due dates. If you need additional assistance, you should contact the issuer. On its coronavirus help page, Barclays also says it's allowing cardholders to dispute transactions through their account online. Capital One Capital One encourages cardholders facing financial difficulties to contact the issuer. The New York Times reports that Capital One is offering cardholders the ability to skip payments without interest, but again, contact the issuer to discuss your options before assuming you're eligible for this. Chase Chase recently released more details on how it's helping credit card customers financially impacted by COVID-19. The issuer also launched an online form where you can enroll to delay three monthly payments on your personal and business card accounts. If you need additional financial assistance, you should send a secure message through your Chase card account to see what options are available to you. If you booked travel through Chase's Ultimate Rewards portal and your trip is more than seven days out, you can request to cancel your booking and get a refund via an online form. (For trips seven or less days out, Chase recommends contacting its customer support team via the number on the back of your card). Citi Citi launched an online form where credit card customers can request assistance for their accounts. You can request waived late fees and waived minimum payments for two consecutive billing periods. Additionally, according to Citi's coronavirus resources page, cardholders can contact the issuer to discuss credit line increases and collection forbearance programs, which could allow you more time to pay off your bill. Call the number on the back of your Citi card for more information. Discover Discover hasn't published any specific assistance program details, but it told USA TODAY that it will offer qualified cardholders support "related to payment timing, fees and late payments." On its website it says customers who have been impacted by COVID-19 should contact the issuer via phone, the mobile app, or online. KeyBank If you have a credit card with KeyBank, you can request to defer your payments via an online form. You can request payment deferral for three billing cycles. The bank won't charge late fees on deferred payments, but you will continue to accrue interest. Synchrony Bank According to USA TODAY, Synchrony Bank — which issues several popular store credit cards — is encouraging customers who need assistance to reach out online to discuss options including waiving certain fees and increasing credit lines. U.S. Bank In a statement to USA TODAY, U.S. Bank said it's "reactively waiving credit card fees" and "working to enhance skip-a-pay and payment deferral programs to meet U.S. Bank cardholders' needs during this pandemic." It also continues to offer its usual financial hardship assistance including increased credit limits and waived fees. Wells Fargo Wells Fargo announced that it's offering fee waivers, payment deferrals, and "other expanded assistance" for credit card customers who contact the company. See Business Insider's list of the best credit card intro APR offers » Related Content Module: More Credit Card Coverage Join the conversation about this story » NOW WATCH: A cleaning expert reveals her 3-step method for cleaning your entire home quickly
Digital-only banks like Chime are seeing record signups amid the coronavirus pandemic. Here's how they drive revenue without lending or charging overdraft fees.
Digital-only banks, or 'neobanks,' like Chime are seeing record signups for their online banking products amid...Digital-only banks, or 'neobanks,' like Chime are seeing record signups for their online banking products amid the coronavirus pandemic. In the traditional business model for banks, they take in deposits, then lend that money out and charge interest. They make money on the 'spread,' or, the difference between the deposit and loan rates, as well as non-interest income like overdraft fees. Instead of earning interest rate spreads, neobanks like Chime, Monzo, and N26 rely on interchange fees earned from debit card transactions. Amid the coronavirus pandemic, Chime piloted a way to get consumers' government stimulus checks early using its overdraft protection product, SpotMe. Click here for more BI Prime stories As brick and mortar banks close amid the coronavirus pandemic, neobanks like Chime are seeing record signups for their digital-only banking products. In February, Chime surpassed the 8 million customer milestone. And as more users sign up for the branchless bank, Chime has been experimenting with a way to for its customers to get part of government stimulus payments, which are part of the CARES Act, early. Chime began testing the stimulus payments with its SpotMe feature, a product that lets users overdraft their accounts for free, in early April. It found that its users wanted some, not all, of the stimulus checks early, so it doubled its SpotMe limit to $200 for select users. By the time most banks posted the stimulus checks last week, Chime had already distributed more than $1 billion in stimulus payments to over 600,000 users. And last Monday, Chime saw the highest number of account openings since it was founded in 2013, Business Insider has reported. But still, Chime and its fellow neobanks like Monzo, N26, and Varo, have not launched full blown lending products. Traditionally, banks make money on interest rate spreads, or, the difference between the rates they pay costumes for their deposits and rates they charge borrowers. But neobanks currently only play on the deposit side of the balance sheet, offering checking and savings accounts. And these neobanks are attracting waves of VC cash. In 2019, neobanks raised more than $3.7 billion in VC cash, a new record following 2018's $2.3 billion, according to CB Insights. In December last year, Chime's valuation quadrupled to $5.8 billion following its massive $500 million Series F. The round was the largest single equity investment in the neobanking space, a record previously held by Brazil's Nu Bank, according to CB Insights. Chime's investors include Dragoneer Investment Group (Compass, Klarna, Nubank), DST Global (Nubank, Robinhood, Root Insurance), and Menlo Ventures (Betterment, Carta, Roku). And Chime isn't profitable, but its CEO Chris Britt told Forbes in November last year that it could be if it reduced its marketing spend. Fees for card swipes and membership Since many digital-only banks are not lending in the US (some of them, like Monzo and N26, offer credit products in the UK and Europe), they need other sources of revenue. For example, every time a customer uses their debit card, the banks earn transaction processing fees — sometimes called interchange fees — from merchants. Beyond interchange, digital-only banks are also experimenting with membership models. Germany's N26, for one, offers tiered freemium membership to its European customers, and now it's thinking about rolling that model out in the US. N26 offers a free standard membership and tiered levels for a monthly subscription fee. Each tier comes with its own perks, like dedicated customer service, discounts at merchant partners, and insurance on car rentals and cell phones. The UK's Monzo, which had rolled out, then shut down its premium membership offering in September last year, just announced its plans relaunch the product in the first quarter this year. Both Monzo and N26 are also neobank unicorns. Monzo was last valued at $2 billion, following its $113 million Series F last June. N26 was last valued at $3.5 billion valuation after its $470 million Series D last July. Chasing customer stickiness To grow both membership and interchange fee revenue, neobanks are prioritizing customer acquisition, then customer stickiness. And in banking, stickiness is often pegged to establishing what's called a primary banking relationship. To be sure, the nature of a primary banking relationship has evolved. Over the past several years, fintechs have been riding a wave of unbundling — meaning they offer consumers pieces of the suite of products typically offered by a bank, like a high-yield savings account or passively managed investment accounts. But for digital-only banks, there's a key piece of a consumer's banking habits that could increase stickiness: payroll direct deposit. The neobanks have deployed products like access to wages two days early and no-fee overdrafts, specifically for customers who use the accounts for direct deposits. And their customer bases are growing. N26 just announced it has 5 million customers globally (including 250,000 in the US), and Monzo says it has 3.8 million customers. That said, the number of open accounts is not necessarily the same as the number of active deposit customers, so pinning down exact customer numbers is tricky. In some cases, one customer who opens both a checking and savings account could be counted with two open FDIC-insured accounts. Since the neobanks are private companies, they are not subject to the same disclosures as public retail banks. Ten-year-old Ally, one of the US's largest digital-only banks which went public in 2014, reported 1.97 million retail deposit customers in fourth-quarter earnings last year. Chime makes the majority of revenue via interchange Chime earns the vast majority of its revenue from interchange paid to Chime by Visa, a Chime spokesperson told Business Insider in emailed comments in December last year. Every time one of Chime's customers makes a purchase with their debit card, the bank earns a fee. Chime also earns a "modest percent of revenue" from referring customers to other fintechs like SoftBank-backed renters insurance startup Lemonade and fellow DST Global portfolio company Root Insurance, the spokesperson said. In February, Chime announced it would offer a high-yield savings account with rates starting at 1.6%, well above the national average savings rate of 0.07%, according to the FDIC. Other digital-only banks unburdened by the cost of brick-and-mortar footprints, like Goldman Sachs' Marcus and Ally Financial, also both offer high-yield savings. While Chime doesn't currently offer direct lending products, it's been vocal about its ambitions to enter the credit side of the balance sheet. But the timelines are unclear. In March of 2018, Chime's CEO Chris Britt told Bankrate that it would launch lending products within the year. "Our initial efforts in the area have been focused on the short term lending segment, and more specifically, the overdraft fee epidemic facing our country," the Chime spokesperson said. Chime launched SpotMe in September last year. Customers who direct deposit at least $500 per month are typically able to overdraft their accounts up to $100. There is no interest applied to the overdrafts, which are repaid to Chime from the next payroll direct deposit. Users are offered the option to leave a tip to "pay it forward." "While we've publicly announced our intention to launch other credit and lending products, we'll focus next on helping our members improve their credit scores and will announce a new service in this area in the first half of 2020," the Chime spokesperson said. Neobanks are challenging legacy players' fee structures In addition to free overdrafts and getting your paycheck a couple days early, there are other features of these digital-only neobanks attracting customers. Across the board, they have leaned into fee transparency, and largely moved toward eliminating things like minimum balance and account maintenance fees. Incumbent retail players like JPMorgan and Bank of America both charge $35 for every overdraft, and $12 in monthly maintenance fees. According to Chime's website, the only fee it charges is $2.50 for out-of-network ATM withdrawals. N26 doesn't charge overdraft, maintenance, nor foreign transaction fees.Join the conversation about this story » NOW WATCH: Why Pikes Peak is the most dangerous racetrack in America