As people working in payments, it is easy to get lost in the excitement of growing balances, increasing transaction volumes and gaining expertise in the latest “*.Pay” model, but this blog makes you sit back for a moment and think about why we are here in the first place: to provide a financial vehicle for households to get through their routine financial commitment.The article cites a study by the JPMorgan Chase Institute, a financial literacy program developed by the USA’s largest card issuer. JPMC Institute is a well-funded, relatively objective source that often uses masked data to build analytics on Chase’s massive customer data base. You can find the original report here and if you poke around the JPMC site, you’ll find lots of other good tidbits.Chase’s study talks about the time it takes the average American household to recover from an unexpected $1,500 financial event, such as a medical bill or perhaps an auto mishap.• …There’s one number we should not lose sight of: $1,500.
• That’s roughly the amount nearly four out of ten American families paid to cover what they describe as extraordinary medical, auto repair or tax bills-requiring more than a year to recover their financial footing with potentially serious impact on their physical and emotional health.The claims draw from anonymized data from a quarter of a million checking accounts maintained at Chase, weighted for age and income to reflect national averages. It also synchs up with studies done from the Pew Charitable Trust.There is much in the news about revolving debt which will soon pass $1 trillion again but the downside is Americans aren’t really great savers, which you can see from this chart. More discipline savings would certainly solve many issues, but that is not the reality of the American household. Credit cards do bridge the gap here, though.• Is there a solution? Certainly efforts underway to help families build emergency savings, find adequate health insurance and plan for income and expense volatility are key to building security.
• How can families begin to take the next step to think about savings for longer-term goals such as investing, buying a home or starting a business?
The lack of savings is not necessarily that we are an undisciplined population, though that is partially true. Stuff happens. Kids get sick. Cars break down. People lose jobs. But, that is even more the reason to save.As an industry, maybe we need to get back to enterprise rewards and offer points to savers, one step beyond Citi’s Double Cash Card, which pays points when you buy and points when you pay your bill. Points when you Save?
Overview by Brian Riley
, Director, Credit Advisory Service at Mercator Advisory Group
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