CFPB: Credit card late fees, like other card costs, have risen above pre-pandemic levels, remain ‘most significant’ in cost, frequency

Credit card companies charged consumers more than $105 billion in interst and more than $25 billion in fees in 2022, with late fees described in a report released Thursday as the “most significant” fee assessed to cardholders in both dollar amount and frequency, the federal consumer financial protection agency said.

Releasing its biennial report on the credit card market, the Consumer Financial Protection Bureau (CFPB) said consumers were charged a total of $14.5 billion in late fees during 2022, returning to pre-pandemic levels and up from $11.3 billion in 2021.

“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,” it said.

Consumers with revolving balances, the bureau reported, were charged more in interest and fees than they earned in rewards. Last year, 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. It said consumers who paid their balances off each month paid just 6% of interest and fees charged and earned 73% of total rewards.

Additional findings include:

  • 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. 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.
  • 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% points above the prime rate in 2022. Margins continued to rise for across all credit score tiers, even as charge-off rates fell during the pandemic.
  • Credit card companies charged borrowers the highest amount of interest and fees ever measured by the CFPB’s data. 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). Many cardholders with subprime scores paid 30 to 40 cents in interest and fees per dollar borrowed each year.
  • The CFPB’s 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. 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 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; and 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’s biennial report on the credit card market is conducted under requirement of the Credit Card Accountability Responsibility and Disclosure Act (CARD Act). The bureau said Wednesday’s report was the sixth done so far.

CFPB Report Finds Credit Card Companies Charged Consumers Record-High $130 Billion in Interest and Fees in 2022