News
CFPB Report Finds Credit Card Companies Charged Consumers a Record $130 Billion in Interest and Fees in 2022
WASHINGTON DC – The Consumer Financial Protection Bureau (CFPB) today released its biennial report to Congress on the consumer credit card market. The report found that in 2022, credit card companies charged consumers more than $105 billion in interest and more than $25 billion in fees. Total outstanding credit card debt surpassed $1 billion for the first time since the CFPB began collecting this data. The report highlights areas of concern, including more consumers carrying monthly balances, with many going deeper into debt over time, while credit card company profits remained significantly 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 surpassing the trillion-dollar mark, we will work to avoid bait-and-switch tactics when this happens to rewards and increase refinancing activity so consumers can get lower rates.”
In accordance with the Credit Card Accountability and Disclosure Act (CARD Act), the CFPB regularly reviews developments in the credit card market. Today’s report, the CFPB’s sixth, identified several recent trends in consumer credit card activity, including:
- Credit card company profits remain high: Profits at major credit card companies 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. General-purpose card profits reached 5.9% in 2022, measured by annual return on assets, compared to 4.5% in 2019, after peaking at 9.6% in 2021.
- Annual percentage rates (APR) continue to rise well above the cost of offering credit: Major credit card companies continue to set interest rates well above major indexes, such as the federal funds target rate, with an average APR margin of 15.4 percentage points above the prime rate in 2022. Margins have continued to increase at all credit score levels, even when charged off. discount rates have fallen during the pandemic.
- Consumers were charged $130 billion in interest and fees: Credit card companies charged borrowers the highest amount of interest and fees ever measured by CFPB data. Cardholders were charged more than $105 billion in interest in 2022, along with $25 billion in fees. For consumers who had a balance, they paid about 20% of their average balance in interest and fees throughout the year (18% of annualized balances on general purpose cards and 21% on private label accounts). 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 charged to cardholders, both in dollar amount and frequency. More consumers are struggling to pay their credit card bills on time, with delinquency rates rising since the end of pandemic relief programs in 2021.
- Credit card debt has reached a record $1 trillion: CFPB data showed that 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 the average total credit card balance per cardholder is back to about $5,300, about the same as before the pandemic. In short, the data shows that more cardholders are paying late fees, falling behind on payments and facing higher costs with mounting debt.
- More borrowers caught in debt: More cardholders are carrying monthly balances or late payments, and a higher percentage of balances are delinquent for more than 180 days. Nearly a tenth of credit card users find themselves in “persistent debt,” where they are charged more interest and fees every year than they pay for the principal – a pattern that some consumers may find increasingly difficult to escape. . Pandemic relief programs in 2020 and 2021 allowed some cardholders to pay off credit card balances, but the number of people facing persistent debt could increase if interest rates remain high.
- Consumers with revolving balances were charged more interest and fees than they earned in rewards: In 2021, consumers who took on debt month-to-month paid 94% of the total interest and fees charged, but earned just 27% of the rewards at major credit card companies. Consumers who paid off their balances each month paid just 6% of the interest and fees charged and earned 73% of the total rewards.
The report also finds a continued shift towards digital communication. Consumers are increasingly using digital portals, such as websites and mobile applications, to manage their cards and make payments. Nearly 80 percent 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 messages and email to contact borrowers about past-due balances. , along with more traditional means such as phone calls or postal mail.
Read the 2023 Consumer Credit Card Market Report.
Consumers can lodge complaints about financial products or services by visiting the CFPB website or by calling (855) 411-CFPB (2372).
Employees who believe their companies have violated federal consumer financial protection laws are encouraged to submit information about what they know to whistleblower@cfpb.gov
The Consumer Financial Protection Bureau is a 21st century agency that implements and enforces federal consumer financial laws and ensures that markets for consumer financial products are fair, transparent and competitive. For more information visit www.consumerfinance.gov.