By Charlene Crowell

(TriceEdneyWire.com) – For the first time since the Consumer Financial Protection Bureau (CFPB) began collecting credit card data, the nation’s related debt reached an all-time high of $1 trillion in 2022. New research released in late October examines how and why this debt grew, but also how emerging trends in card usage affect the day-to-day lives of consumers.  
While companies charged consumers more than $105 billion in interest and more than $25 billion in fees, average credit card balances per cardholder returned to about $5,300, about the same as before the pandemic. At the same time, more cardholders are being charged late fees, falling behind on payments, and facing higher costs on growing debt.  
Today nearly one in 10 consumers is caught in what CFPB terms ‘persistent debt’, charged more in interest and fees than they pay toward the principal owed, a pattern that makes each passing month’s charges increasingly harder to avoid. Average credit card minimum payments on revolving credit accounts now reach over $100 per month and are also a contributing factor to rising late fees and overall debt. 
“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,” said CFPB Director Rohit Chopra.  
Increased indebtedness also translated into record industry profits, now higher than those reached in pre-pandemic years. Two key factors, according to the report, significantly contributed to industry profitability: an average APR margin of 15.4 percentage points above the prime rate in 2022, and only 10 credit card companies dominating the marketplace.  
Although the nation has nearly 4,000 credit card issuers, four-fifths – 80 percent – of the card activity was with one of the firms in the top10.  
The highest credit card APRs are, as with other consumer financial products, among consumers who carry high credit card balances, missed payment(s), or delinquent accounts, and have subprime credit ratings, scores of less than 670 in a range of 300- 850.  Consumers who have filed bankruptcies can also expect that action to affect their credit scores for seven years thereafter.  
A 2019 report by Experian, one of the nation’s three credit card bureaus, found that more than a third of consumers – 34.8 percent – were classified as subprime. Millennials comprised the largest number of subprime borrowers.   
According to Experian, “Prime consumers tend to have more mortgages and credit card accounts, while subprime consumers have more student loans and personal loans…Subprime consumers have twice as many personal loan accounts as prime consumers on average. That said, their average balance is less than half of prime consumers’ average balance.” 
CFPB’s new credit card report found that many cardholders with subprime scores paid 30 to 40 cents in interest and fees per dollar borrowed each year. Further, consumers using reward cards that earn bonus points for frequent usage, earned just 27 percent of rewards at major credit card companies, but paid 94 percent of total interest and fees for carrying debt from month to month.   
Last year, and for the first time since 2015, CFPB found a spike in over-limit transactions. According to the report, “Recent changes in incidence are also driven by accounts with subprime scores. Over-limit transactions tend to be more common among lower-score cardholders since these cardholders typically have lower credit limits and higher credit utilization than higher-score cardholders, making it more likely that even a modest purchase might exceed their credit limit.” 
Along with high profits, CFPB’s new report documents a growing consumer shift toward digital communications, websites and mobile apps now used by nearly 80 percent of cardholders to manage card usage and make payments. Among consumers ages 25 and younger, 95 percent used mobile apps for card transactions.    
Consistent with consumer practices, credit card companies and debt collectors are now relying more on text messaging and email to contact borrowers about past-due balances, in addition to phone calls or postal mail.  
In separate and independent findings, the New York Federal Reserve’s Liberty Street blog also noted changing credit card practices earlier this year.  
“[T]here were 18.3 million borrowers behind on a credit card at the end of 2022 compared to 15.8 million at the end of 2019. Instead, the evidence suggests that higher prices and higher interest rates are the more likely culprits driving delinquencies… [O]n a person-level, this financial distress is real, and the delinquent marks will impact their access to credit for years to come.”  
Charlene Crowell is a senior fellow with the Center for Responsible Lending. She can be reached at Charlene.crowell@responsiblelending.org.