WASHINGTON–During 2022, credit card companies charged consumers more than $105 billion in interest and more than $25 billion in fees, while consumers with revolving balances were charged more in interest and fees than they earned in rewards, according to a new CFPB report.
In addition, the Consumer Financial Protection Bureau said in its new biennial report to Congress on the consumer credit card market that total outstanding credit card debt eclipsed $1 trillion for the first time since the CFPB began collecting its data, and said its new report highlights areas of concern, including more consumers carrying balances month to month, with “many falling deeper into debt over time, while credit card company profits remained significantly above pre-pandemic levels.”
The Bureau said its newest report, its sixth, identified several recent trends in consumer credit card activity, including:
Credit Card Company Profits Remain High
“Major credit card companies’ profits are now higher than pre-pandemic levels, potentially signaling a lack of competition in a market consistently dominated by the top 10 credit card companies,” the CFPB said. “Profits for general purpose cards reached 5.9% in 2022, as measured by annual return on assets, compared to 4.5% in 2019, after peaking at 9.6% in 2021.
“Annual percentage rates (APRs) continue to rise far above the cost of offering credit: Major credit card companies continue to set interest rates far above major indexes like the federal funds target rate, with an average APR margin of 15.4% percentage points above the prime rate in 2022,” the Bureau continued. “Margins continued to rise for across all credit score tiers, even as charge-off rates fell during the pandemic.”
Consumers Charged $130 billion in Interest and Fees
According to the CFPB, credit card companies charged borrowers the highest amount of interest and fees ever measured by the Bureau’s data.
“Cardholders were charged over $105 billion in interest in 2022, along with $25 billion in fees. For consumers who carried a balance, they paid about 20% of their average balance in interest and fees over the course of the year (18% of annualized balances on general purpose cards and 21% on private label accounts),” the CFPB said. “Many cardholders with subprime scores paid 30 to 40 cents in interest and fees per dollar borrowed each year.
“Consumers were charged $14.5 billion in late fees, returning to pre-pandemic levels and up from $11.3 billion in 2021: Late fees continued to be the most significant fee assessed to cardholders in both dollar amount and frequency,” the CFPB continued. “More consumers are facing difficulties paying their credit card bills on time, with delinquency rates rising since the end of pandemic relief programs in 2021.”
Credit Card Debt Reached a Record $1 Trillion
The CFPB said its data showed credit card debt at the end of 2022 surpassed $1 trillion for the first time, and annual spending on credit cards increased to $3.2 trillion.
The report also found that total average credit card balances per cardholder returned to about $5,300, about the same as before the pandemic, the CFPB said.
“All in all, the data show more cardholders are being charged late fees, falling behind on payments, and facing higher costs on growing debt,” the CFPB stated.
More Borrowers Are Getting Caught in Debt
More cardholders are carrying balances month to month or failing behind on payments, and a greater percentage of balances are going more than 180 days delinquent, according to the CFPB.
“Nearly one-tenth of credit card users find themselves in ‘persistent debt’ where they are charged more in interest and fees each year than they pay toward the principal—a pattern that could become increasingly difficult for some consumers to escape,” the CFPB said. “Pandemic relief programs in 2020 and 2021 enabled some cardholders to pay down credit card balances, but the number of people facing persistent debt could climb if interest rates remain elevated.”
Consumers With Revolving Balances Were Charged More in Interest and Fees Than They Earned in Rewards
The CFPB said it found that in 2022, consumers who carried debt from month to month paid 94% of total interest and fees charged but earned just 27% of rewards at major credit card companies. Consumers who paid their balances off each month paid just 6% of interest and fees charged and earned 73% of total rewards, it added.
Additional Findings
The CFPB said the report also finds a continuing shift toward digital communication.
“Consumers are increasingly using digital portals, such as website and mobile apps, to manage their cards and make payments,” the CFPB said. “Nearly 80% of cardholders are enrolled in their card’s mobile app, with adoption rates even higher for consumers under 65.
“The report also finds that credit card companies and debt collectors are relying more on text messaging and email to contact borrowers about past-due balances, alongside more traditional means like phone calls or postal mail,” the CFPB added.
The full report can be found here.
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