Odd Lots This Is Why Credit Card Interest Rates Are So High
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Nov 28, 2025 
In this conversation with Itamar Drexler, a finance professor at the Wharton School, listeners dive into the surprising world of high credit card interest rates. Drexler explains how banks profit through swipe fees and marketing costs, revealing the stark differences between transactors and revolvers. He debunks the myth that default rates justify these high APRs and discusses the impact of rewards on consumer behavior. The discussion also touches upon the challenges faced by fintech and the implications of macroeconomic factors on credit card pricing.
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Cards Deliver High Bank ROAs
- Credit card banks earn much higher returns on assets than typical banks, often 3.5–4% versus ~1%.
- Itamar Drexler found high APRs are a major driver of that outsized profitability.
How Swipe Fees Flow
- Card revenue splits into interchange/network fees and issuer share, with swipe fees around 15–20 basis points.
- Issuers collect the majority via interchange, roughly ~1.8% on credit cards, which funds rewards and issuer profits.
Majority Of Users Revolve
- Roughly 60% of card users revolve balances and pay interest, and average APR for revolvers is around 23%.
- That APR level is strikingly higher than most other forms of consumer and corporate credit.