credit card, recording higher levels of delinquency than peers, judging by Goldman’s financial filings. In the industry, that’s called “seasoning.” It takes years for bad debt within a credit-card portfolio to settle down, but that span of elevated losses makes it harder to attract new entrants.
There’s also a bigger wrinkle that gives banks pricing power: rewards. The rise of cards that offer points, miles and other discounts, such as the Chase Sapphire and American Express Platinum cards, has changed the calculus of what makes consumers switch, and may make them less sensitive to fees and rates. Capital One booked a $7.6 billion expense for rewards in 2022, compared with $1.6 billion a decade earlier.
The prevalence, and incomparability, of rewards – and their rising popularity – is just one market distortion the CFPB’s late-fee crackdown wouldn’t change. There’s also the fee charged to retailers every time a customer swipes, which saddles them with costs ultimately reflected in higher prices, but also provides issuers with income that makes rewards possible. One senator already has
that would lower those charges and wreak havoc, bank executives complain, on the industry’s economics. If late fees have raised hackles among U.S. lenders, they’re only a taste of what could lie in store.
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