As the cost of groceries, housing, and everyday necessities continues to rise, many Americans are leaning more heavily on their credit cards to stay afloat. But not everyone is experiencing credit card usage the same way—some are actually profiting from it.
Over the years, the credit card industry has quietly evolved into a tale of two markets, according to the Atlantic: one that showers perks and rewards on wealthy users, and another that traps lower-income Americans in costly debt, effectively allowing the poor to subsidize the rich.
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Transactors vs. Revolvers.
Aaron Klein of the Brookings Institution explained that affluent users are often labeled “transactors” in the credit world. These individuals typically have the cash flow to pay off their balances in full each month, sidestepping late fees and sky-high interest rates. And those interest rates are no joke. The Federal Reserve Board reported that as of February, the average rate on credit cards carrying a balance hit 21.91%, though the exact rate depends on one’s credit score.
But the wealthy aren’t sweating those numbers. Instead, they use credit cards strategically to rack up travel rewards, cash back, airport lounge access, seat upgrades, and more. For them, spending money on credit is less about necessity and more about maximizing value, earning as they spend, rather than paying for it later.
“If you’re spending $100,000 a year, you’re getting maybe $1,500 back in terms of points or cash,” Klein told the Atlantic on March 19 of the huge perks transactors often receive. “You’re not paying taxes on that. It’s worth closer to $2,500 or $3,000 a year in taxable income.”
Credit card companies love transactors because these users rarely default, making them low-risk and highly profitable. For major financial institutions like Chase, Citi, American Express, and Capital One, it’s a win-win: they earn a cut from every transaction while offering cards packed with perks. Frequent travel among transactors also fuels lucrative partnerships between credit card issuers, airlines, and hotel chains.
