A growing tide of consumer debt helped propel some of the country's largest banks to large profits last year.
JPMorgan Chase, the country's largest bank, said this week that it earned a record $36 billion profit last year with credit card loans increasing 8%. U.S. Bancorp said Wednesday that it brought in $7 billion last year with the help of a 7.6% increase in its credit card business.
Citigroup, which reported a profit of $19 billion last year, said that its branded cards business increased 8% in North America last year. Even Wells Fargo, which has been struggling to rebound from a series of scandals, found a bright spot with consumers, reporting that credit card loans were up $2 billion during the fourth quarter.
"The credit card market, it's still a leading growth driver for the consumer bank," said Ken Leon, director of equity research at CFRA Research.
Consumers' growing debt loads, expected to increase $80 billion last year, are a cause for concern among some economists but show no sign of slowing. Consumers have shifted away from cash and toward online shopping, making credit cards ubiquitous, industry analysts say. Meanwhile, the strong economy and low unemployment has kept delinquencies low.
"Even though consumers are confident, people are still carrying significant debt," said Ted Rossman, an analyst for Creditcards.com. "From a bank's perspective that is a big money maker. From a consumer's perspective I would encourage everyone to pay that down."
Consumers' appetite for credit cards has not been dampened by relatively high interest rates. The average rate is 17.3%, near a record high, for consumers with a good credit score, according to CreditCards.com, which surveys the country's 100 most popular cards. The cost is steeper for consumers with lower credit scores, 25.3%, according to the site.
Bernie Sanders, I, the Vermont senator running for the Democratic nomination for president, and Rep. Alexandria Ocasio-Cortez, D-N.Y., introduced legislation last year to cap credit card interest rates at 15% but the measure hasn't gained any ground. And banks haven't significantly lowered rates they charge on credit cards despite several interest rate cuts by the Federal Reserve, bolstering the industry's profits, analysts have said.
"Vulnerable borrowers are the most vulnerable to the higher interest rates," Rossman said.
Such high rates made it difficult for Jonathan Isaza, a Florida college student, to pay off his debt. After moving out on his own, Isaza said was making just $10 an hour. But didn't initially factor in the cost of car insurance in his budget and accumulating about $2,000 in credit card debt.
"Honestly this is unusual to me. I took a personal financial management class in high school that taught me how to save and budget my money well and how to develop good credit," he said in a Twitter exchange. "Ironically enough, I'm a finance major."
The high interest rates, nearly 20%, made it difficult to pay down the debt, Isaza said. "I would pay what I could but since the balance was high at the time the interest would put it back to where it was," he said.
Eventually Isaza said he found a better-paying job and switched insurance companies, helping him drive down his debt. "I can finally start saving," he said.
Joe Martin, a marketing executive in Utah, is among many consumers who are able to avoid interest changes by paying off their bill every month. Martin pays a yearly fee for two credit cards he uses for routine purchases while accumulating reward points for free flights and hotel stays.
"I have always paid things off quickly," Martin said, adding that it is a habit his parents encouraged.
He is at the "heart of the storm" of new credit card offers but has yet to be tempted, Martin said. "We go to Costco frequently and they have a [credit card] offer but I don't necessarily need that."
Also driving profits for banks are "swipe fees" that card companies collect from retailers, typically 2% of the total purchase, industry analysts say. The more consumers use their cards, the more companies earn - whether the customer carries a balance or not.
Wells Fargo reported that the volume of credit card purchases increased 4% during the fourth quarter and that the number of active accounts had reached 8.1 million. Last year, JPMorgan Chase said merchant processing volume increased 11%.
"The most profitable customers for credit companies are high income people who spend a lot and pay their bill on time," said Aaron Klein, a Brookings Institution fellow.