'There Are Two Kinds of Credit Cards'

The credit-card market has quietly split in two, Atlantic argues in a new story: one offering generous benefits to wealthy Americans, the other offering expensive debt to the poor. Credit-card balances have reached an all-time high of $1.2 trillion, with serious delinquency rates climbing to their highest point since the Great Recession. "Transactors" pay off balances monthly and earn valuable rewards worth up to $3,000 annually in taxable income equivalent, while "revolvers" carry balances at a brutal 21.5% average APR. The poor subsidize the rich through two mechanisms: swipe fees that drive up retail prices by $1,700 annually for the average family, and late fees and interest charges that finance rewards programs. Interest revenue for credit-card companies has ballooned from $76 billion in 2020 to $170 billion in 2024. The economy now appears to be slowing down. High-income families are increasingly resembling working-class families in credit data, with three in five households earning over $80,000 annually carrying balances for more than a year. Card companies are now offering fewer cards to subprime borrowers, creating a troubling dilemma - while expensive credit cards are harmful, having no credit access might be worse. Bipartisan legislation now aims to cap interest rates and lower swipe fees. Read more of this story at Slashdot.

Mar 20, 2025 - 15:31

The credit-card market has quietly split in two, Atlantic argues in a new story: one offering generous benefits to wealthy Americans, the other offering expensive debt to the poor. Credit-card balances have reached an all-time high of $1.2 trillion, with serious delinquency rates climbing to their highest point since the Great Recession. "Transactors" pay off balances monthly and earn valuable rewards worth up to $3,000 annually in taxable income equivalent, while "revolvers" carry balances at a brutal 21.5% average APR. The poor subsidize the rich through two mechanisms: swipe fees that drive up retail prices by $1,700 annually for the average family, and late fees and interest charges that finance rewards programs. Interest revenue for credit-card companies has ballooned from $76 billion in 2020 to $170 billion in 2024. The economy now appears to be slowing down. High-income families are increasingly resembling working-class families in credit data, with three in five households earning over $80,000 annually carrying balances for more than a year. Card companies are now offering fewer cards to subprime borrowers, creating a troubling dilemma - while expensive credit cards are harmful, having no credit access might be worse. Bipartisan legislation now aims to cap interest rates and lower swipe fees.