Credit Sesame’s personal finance news roundup May 24, 2025. Stories, news, politics and events impacting personal finance during the past week.
Moody’s joins other agencies in U.S. credit downgrade
In May 2025, Moody’s Ratings became the third of the three major institutional credit agencies to downgrade U.S. debt. Credit agency grades are an assessment of the reliability of the borrower. As with individuals, institutions such as the U.S. government that borrow money may have to pay higher interest rates if their credit ratings are lowered. In this case, the reduced rating could result in higher U.S. bonds, notes, and T-bill yields. That translates to higher borrowing costs for the government. The Moody’s report stated that its decision was based on the fact that the U.S. has debt and interest payments that are a much higher proportion of its revenue than other top-rated countries. Moody’s also noted that the extension of the 2017 Tax Cuts and Jobs Act, currently under consideration in Congress, would add $4 trillion to the deficit over the next decade. In cutting the U.S. credit rating, Moody’s joins Standard & Poor’s and Fitch Ratings, which had previously downgraded U.S. debt. See article at Yahoo.com.
Capital One completes $35B Discover acquisition
Capital One announced that it completed its Discover purchase, following regulatory approval in April 2025. This concludes a process that took 15 months from the initial announcement of the intended purchase. The takeover creates the largest credit card issuer in the U.S. as measured by loan volume. Customer accounts at both institutions will remain unchanged for now. However, customers should remain alert to notifications of possible changes in the months ahead. See article at Yahoo.com.
Delinquencies ease slightly, but debt balances continue to rise
The April 2025 Credit Industry Snapshot from TransUnion found that payment delinquencies eased for auto loans, credit cards, mortgages, and personal loans. Even the troubled subprime credit card category showed improved payment performance. The percentage of subprime credit card customers whose payments were 90 days or more overdue was 21.06 percent in April. While still high, that figure marks an improvement from 21.86 percent in March and 23.08 percent a year earlier. However, not all the news on consumer debt was encouraging. Average balances owed increased for credit cards, mortgages, and personal loans. See report at TransUnion.com.
Klarna reports rising BNPL losses in first quarter
An earnings release for the first quarter of 2025 from Buy Now Pay Later (BNPL) leader Klarna showed that losses from unpaid bills are mounting. More consumers are turning to BNPL as conventional credit becomes maxed out, but a growing number are finding it challenging to keep up with payments. Klarna reported consumer credit losses of $136 million in the first quarter, up 17 percent compared to the same quarter in 2024. The growth rate for losses outpaced Klarna’s growth rate for revenues. The consumer credit losses were high enough to result in a $99 million net income loss for Klarna in the first quarter. See article at NBCNews.com.
Fed survey shows consumers still use cash, but habits are shifting
A 2024 Federal Reserve Bank of Atlanta study found that cash usage has declined steadily but remains fairly common. In 2024, consumers used cash in 14 percent of their transactions. This was down from 16 percent the previous year and 19 percent back in 2021. In total, 83 percent of consumers reported using cash at least once within the past 30 days, down from 87 percent in 2023. Use of paper checks declined from 40 percent of consumers in 2023 to 35 percent in 2024. Credit cards were the leading form of payment, used in 35 percent of transactions. Debit cards followed closely at 30 percent. Payment cards are also gaining traction in bill payments, with credit cards used in 15 percent of those transactions and debit cards in 18 percent. The survey also found that ownership of crypto assets has declined for two consecutive years, from a peak of 9.6 percent in 2022 to 8.6 percent in 2023 and 7.7 percent in 2024. Finally, 71 percent of consumers reported using a mobile phone or tablet to make a payment in 2024, which has held steady since 2021. See details at AtlantaFed.org.
Mortgage rates rise to highest level since February
Thirty-year mortgage rates rose by 5 basis points last week to reach 6.86 percent, the highest level since mid-February 2025. Last week’s increase also pushed 30-year rates 1 basis point above where they were at the start of the year. Fifteen-year mortgage rates rose by 9 basis points last week, returning to just above the 6 percent mark at 6.01 percent. As with 30-year rates, 15-year rates are now 1 basis point above their early January level. See rate details at FreddieMac.com.
Mortgage application volume declines despite year-over-year gains
The recent rise in mortgage rates has cooled mortgage application activity. Overall application volume declined by 5.1 percent on a seasonally adjusted basis last week, according to the Mortgage Bankers Association. Despite the weekly slowdown, mortgage applications remain higher than a year ago. Refinance applications rose 27 percent from the same week in 2024, while purchase applications increased by 13 percent. See mortgage application release at MBA.org.
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