Credit Card Rates at 22%: How the Middle Class Is Subsidizing Bank Prof

Credit card interest rates, or annual percentage rates (APRs), have surged over the past decade. The Federal Reserve reports that the average APR on accounts with balances was 22.25% as of May 2025, up from 12.9% in 2013. The Consumer Financial Protection Bureau (CFPB) notes that the APR margin—the portion of interest beyond banks’ funding costs—has nearly doubled to 14.3% from 9.6% a decade ago, costing borrowers an estimated $25 billion in 2023 alone.

Why the increase? Banks point to rising federal funds rates, which influence their prime rates, currently around 8%. Yet, the CFPB highlights that “excess” APR margins, not tied to funding costs, are at historic highs. Major issuers like JPMorgan Chase, Citigroup, and Capital One, which control 80% of the credit card market, are charging rates far above what’s needed to cover risks or operations, boosting their return on assets (ROA) to three times the average for other banking activities.

How the Middle Class Bears the Burden

The middle class—households earning $50,000 to $100,000 annually—is particularly vulnerable. Federal Reserve data shows that 56% of U.S. households carry credit card debt, with an average balance of $6,300. For a family with a $5,300 balance at 22% APR, the CFPB estimates an extra $250 in annual interest due to inflated margins. This compounds financial strain for those already grappling with rising costs for groceries, housing, and healthcare.

Reward cards, often marketed to middle-class consumers, exacerbate the issue. While they offer lower APRs (18% vs. 22% for classic cards), they yield higher bank profits ($23 vs. $6 per card monthly) due to higher spending and fees. These cards encourage overspending, trapping users in a cycle of revolving debt. Low-income households face even higher rates—often 25% or more on subprime cards—but the middle class, with larger balances, contributes significantly to bank revenues.

Systemic Issues: A Market Rigged for Profit

The credit card market’s structure favors banks over consumers. A concentrated industry, dominated by 10 issuers, allows for “supracompetitive” profit margins, as noted in a 2025 Vanderbilt University study. Unlike other loans, credit card rates aren’t capped by federal law, though some states have usury laws. National banks, often incorporated in states like Delaware with lax regulations, can charge high rates nationwide, bypassing stricter state laws.

Recent policy changes haven’t helped. The 2024 defeat of a CFPB rule aimed at capping late fees sparked a wave of rate hikes, with retail cards hitting a record 30.5% APR. Meanwhile, banks like Synchrony and Bread Financial have kept these elevated rates, citing “market conditions,” even after the rule’s repeal. Swipe fees, which merchants pay and pass on to consumers, also fuel bank profits, reaching $172 billion in 2023, a 50% increase since the pandemic.

The Hidden Subsidy: Middle-Class Dollars to Bank Profits

The middle class is effectively subsidizing bank profits through high interest payments. In 2024, JPMorgan Chase reported a 32% profit margin, Citigroup 16%, and Wells Fargo 22%, far outpacing the 3% average for general retail. These profits stem largely from interest and fees paid by cardholders who can’t pay off balances monthly. The CFPB warns that high APRs push consumers into “persistent debt,” where interest and fees outstrip principal payments, trapping families in a cycle of borrowing.

This dynamic has broader economic impacts. Middle-class households, squeezed by stagnant wages and inflation, divert income to debt servicing, reducing spending on goods and services. This slows economic growth, as noted by the White House Council of Economic Advisors, which estimates that rising debt costs could shave 0.3% off GDP growth by 2030.

What Can Consumers Do?

While the system tilts toward banks, middle-class households can take steps to mitigate the impact:

• Pay Balances in Full: Avoid interest by paying off your card monthly. If carrying a balance, prioritize high-APR cards first.

• Switch to Low-Rate Cards: Look for credit unions or smaller banks offering APRs below 15%. Compare options on sites like Bankrate.com.

• Negotiate Rates: Call your issuer to request a lower APR, especially if you have a good payment history. CFPB data shows 76% of such requests succeed.

• Use Balance Transfer Cards: Transfer high-interest balances to 0% APR introductory offers, but beware of transfer fees (typically 3-5%).

• Budget Wisely: Track spending with apps like Mint or YNAB to avoid overspending on rewards cards. Cut non-essential expenses to free up cash for debt repayment.

• Seek Assistance: Nonprofits like the National Foundation for Credit Counseling offer free debt management plans to consolidate payments and lower rates.

The 22% credit card rates of 2025 are more than a personal finance problem—they’re a systemic issue that demands reform. Advocates like the Merchants Payments Coalition push for the Credit Card Competition Act to curb swipe fees, which could lower merchant costs and, indirectly, consumer prices. Meanwhile, reinstating CFPB rules to cap excessive fees and margins could ease the burden on cardholders.

As winter approaches, middle-class families face a stark choice: navigate the debt trap or demand change. By taking control of their finances and supporting policy reforms, consumers can challenge a system that prioritizes bank profits over household prosperity.