Plastic Privilege: Why Credit Cards Work Better When You’re Rich - Page 2

But those rewards are largely out of reach for working-class families and low-income individuals. Klein refers to this group as “revolvers,” borrowers who rely on credit cards both as a payment method and as a short-term financial lifeline. They’re the ones turning to credit for unexpected bills, groceries, or just to bridge the gap until payday. Unlike transactors, revolvers often qualify only for basic, no-frills cards that lack enticing rewards like cash back or travel perks.

Worse, many revolvers carry balances for months or even years, becoming trapped in a costly cycle of debt. The average U.S. credit card balance rose from $6,380 in Q3 of 2024 to $6,580 in Q4, according to TransUnion. And with interest rates hovering above 21%, that debt is more expensive than ever. The Federal Reserve Bank of New York reported that credit card balances “increased by $45 billion from the previous quarter to reach $1.21 trillion at the end of December.”

When rising balances collide with soaring interest rates, the financial burden can quickly overwhelm household budgets, pushing many deeper into a cycle that’s hard to break. Delinquency rates on credit card loans were up by 3.08% at the end of Q4.  

“When you talk to rich people who pay off their balance, they think that credit-card companies are losing money on them, and they’re the ones subsidizing the people who carry a balance,” Klein said. “It’s the exact opposite.”

Klein shared that wealthy families benefit twice from the credit card system. First, swipe fees charged to businesses when customers use credit cards raise prices for all consumers, but only those with high-end rewards cards (usually the wealthy) get perks in return. Second, the rewards and perks that wealthier transactors enjoy are indirectly funded by the interest and fees paid by lower-income revolvers who carry credit card debt. In short, the poor help pay for the rich to benefit.