This passage discusses the widespread use of rewards credit cards in the United States and their impact on consumers. It highlights that rewards cards have become extremely popular, with about 90% of all credit card spending being on such cards. These cards offer perks like cashback, free flights, and other benefits, which incentivize consumers to use them extensively.
However, there's a pattern where different income groups experience rewards cards differently. Super-prime cardholders (those with high credit scores) tend to benefit, earning rewards and paying less interest. In contrast, subprime consumers (those with lower credit scores) often end up paying more in interest and accumulating more debt, which may lead to financial struggles.
The article suggests that credit card companies profit from interchange fees, annual fees, and interest, and these revenues may not necessarily rely on cross-subsidization from different customer segments. Financial education and responsible credit card use are emphasized as crucial for consumers, especially those who are less financially literate.
Additionally, the passage mentions the role of secured credit cards as a tool to build credit responsibly and the need for more financial literacy among Americans. It also touches on the debate about whether legislation could address issues related to credit card fees and fairness in the payment system.
Sure, here are the key facts extracted from the text:
1. About 90% of all money spent on credit cards is on rewards cards.
2. In 2019, the largest US banks reported over $140 billion in revenue from credit cards, with more than half coming from rewards cards.
3. The average APR for credit cards in early 2023 is about 21%.
4. Interchange fees are fees paid by merchants to cover costs associated with accepting credit card payments, totaling over $120 billion annually.
5. Americans carry an average of $6,194 in credit card debt, and outstanding credit card debt may reach $1 trillion.
6. Low-income card holders have higher delinquencies, higher median balances, and credit card debt accounts for more than 26% of their total income.
7. Super-prime card holders (credit scores of 720 and higher) earn on average $9.50 in rewards and pay $7.10 less in interest on rewards cards than on classic cards.
8. Subprime consumers (credit scores ranging from 580 to 659) earn only $1.80 in rewards and pay $6.40 more in interest on rewards cards.
9. There's a claim of an annual redistribution of more than $15 billion from less to more educated, poorer to richer, and high to low minority areas due to rewards cards.
10. Rewards cards are designed to be independently profitable, and the majority of rewards customers pay in full every month.
11. Lack of financial literacy is an ongoing problem, and while more education is needed, banks also play a role in enticing consumers to spend.
Please let me know if you need any further information or analysis.