• A card issued by banks to users to purchases goods with their credits instead of cash they have in the their bank accounts, users can usually earn rewards in the form of cashback or miles

Credit Card Business Model

  • The above diagram shows the Credit Card income composition of USA banks in 2019, that is a total of 140 billion dollars, and more than of it is coming from credit cards that give user rewards
  • of the income is coming from the Credit Card Interest, the poor is likely to pay much more interest than the rich since they are less financially informed and less liquidity to pay back
  • of the income is coming from the Credit Card Interchange Fee, merchant usually pass this fee back to the consumers, so the poor who is less financially informed and not owing a credit card is going to pay this extra fee without any form of benefits
  • of the income is coming from the Credit Card Fee, the rich usually pays annual card fee to get more benefits & foreign transaction fee when they are travelling, the poor usually pays late fee & over-the-limit fee


If everyone uses credit card wisely, avoiding credit card interest and minimise credit card fee. The credit card business model is unlikely to be profitable for banks.

However, the poor tends to use credit card unwisely due to the lack of financial knowledge and liquidity. So the poor gets poorer & the rich get richer in this credit card business.

Credit Card Interest

  • The interest fee charged on credit card is usually above . The poor is more likely to pay the interest since they are more likely to lack the liquidity to pay their credit card debt and their lower credit score results in a higher interest rate


There is a total of $1.25 trillion credit card debt in USA, as of March 2024.

Credit Card Fee

  • The fee includes annual card fee, foreign transaction fee, late fee & over-the-limit fee
  • Rich tends to have a higher annual card fee & foreign transaction fee. While poor tends to have a higher late fee & over-the-limit fee

Credit Card Interchange Fee

  • The is fee charged on the merchants when consumers use credit cards to make the payments. Merchants will usually include this fee in the price of the product. So people who aren’t using a credit card is paying an extra fee here.