Operating costs and heavy marketing

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.

Read more:
US Consumer Confidence Falls by Most Since April on Economy
Gambling, Prediction Markets Create New Credit Risks, BofA Warns

Only http://Bloomberg.com subscribers can get the Odd Lots newsletter in their inbox each week, plus unlimited access to the site and app. Subscribe at  bloomberg.com/subscriptions/oddlots

See omnystudio.com/listener for privacy information.