This Is Why Credit Card Interest Rates Are so High
Credit users are paying for their own marketing.
A shopper pays with a credit card at the farmer's market in San Francisco.
Photographer: David Paul Morris/BloombergListen to Odd Lots on Apple Podcasts
Listen to Odd Lots on Spotify
Watch Odd Lots on YouTube
Subscribe to the newsletter
Some people pay off their credit cards at the end of each month. They use the cards as a payment method and collect points and rewards, and never have to pay any interest. For other users, interest can be sky high — way higher than what would be expected simply based on a user's credit or default risk. Why is this? And how do credit card companies get away with charging interest at these levels? On this episode, we speak with Itamar Drechsler, a finance professor at Wharton, who recently co-authored a piece titled Why Are Credit Card Rates so High? Drechsler walks us through the costs of running a credit card operation and explains what borrowers are really paying for.