A Consumer Financial Protection Bureau report finds that in 2022 a record high $130 billion in credit card interest and fees was charged by credit card companies.
In the report released by the Consumer Financial Protection Bureau (CFPB), it was found that credit card companies charged consumers over $105 billion in interest and more than $25 billion in fees in 2022. The total outstanding credit card debt rose to over $1 trillion, which is an all-time high since CFPB started data collection. This surge is driven by consumers carrying balances from month to month, consequently sinking deeper into debt due to high credit card interest rates. Credit card companies have benefited largely as their profits remained notably above pre-pandemic levels. “Last year, Americans paid $130 billion in interest and fees on their credit cards," said CFPB Director Rohit Chopra. "With credit card debt crossing the trillion dollar mark, we will be working to prevent bait-and-switch tactics when it comes to rewards and to increase refinancing activity so consumers can get lower rates.”
The press release also revealed that general-purpose cards' profits reached 5.9 percent in 2022 after peaking at 9.6 percent the previous year, signaling potential competition deficiency in the credit card market. Annual Percentage Rates (APRs) continued rising substantially above the cost of offering credit as major credit card companies set interest rates much higher than major indexes like the federal funds target rate; average APR margin stood at a significant 15.4 percentage points above the prime rate last year.
Furthermore, there's a growing trend of balances exceeding 180 days delinquent according to the report findings with about one-tenth of credit card users persistently indebted—defined as those paying more in interest and fees yearly than their principal amount payment capability; such condition perpetuates an insurmountable challenge for these consumers striving to climb out of this cycle of debt. It also highlighted that those with revolving balances were charged more in interest and fees than what they earned in rewards. In terms of major credit card companies, consumers who carried debt monthly accounted for 94 percent of total interest and fees charges but only bagged 27 percent of rewards.
