Credit card providers begin their games with enormous marketing efforts. Credit card providers either email or snail mail over two billion new offers for credit cards per year in the United States. Given that there are 159,000,000 individuals employed in the U.S. (and presumably able to pay a credit card bill), this corresponds to six new credit card offers each year for each employed person.
Second, the fees for late payment or exceeding your credit limit are exorbitant, ranging from $30 to $41. According to the Consumer Financial Protection Bureau, credit card companies raked in $12 billion in late fees in 2020, when millions of workers were laid off. Consumers with subprime credit cards and private-label store cards are particularly susceptible, especially in relation to their credit limits. The report also highlights that consumers living in low-income and majority-Black communities are disproportionately impacted by credit card late fees.
Third, the offers of 0% “introductory” interest for a period of time is not really 0% interest. The credit card companies charge you a 3% to 5% “processing fee,” which covers their cost of funds, and then the rate jumps to 15% to 25% when the period is up.
Finally, Visa and Mastercard are virtual duopolies in their marketplace. A duopoly is a market that has only two competitors in it. These credit cards have the overwhelming majority of market share and their above-normal profits are evidence monopolistic behavior.