ICYMI: New Analysis: Structural Costs — Not Credit Card Interest — Drive Household Budget Pressures

Targeting Credit Card Interest Misses the Real Cost Drivers -and Weakens a Critical Safety Net

WASHINGTON, D.C. - The Consumer Bankers Association (CBA) today released a new white paper, "Affordability and Household Expenses, Big and Small: Evidence from Public Federal Data 2013-2024," authored by economist Dr. Alexei Alexandrov, analyzing how American household income and expenses have evolved over the past decade, examining the key areas that today's consumers are struggling to afford, and key considerations for policymakers.

Key Findings

The findings underscore that rising affordability pressures are concentrated in four major categories: housing, healthcare, food, and auto. It also highlights how these costs are most burdensome for lower income consumers, because, while real incomes kept pace with rising expenses, consumers in the bottom two quintiles consistently spent more than they earned.

The paper also looked at various financing charges, which are themselves an expense for consumers, and found that credit card interest, overdraft, or other bank fees represent a relatively small share of overall household spending - and importantly, that they represent the critical need of these products as a shock absorber for millions of consumers.

Key insights around these expenses include:

• Healthcare is the largest and fastest-growing expense. When accounting for employer- and government-sponsored healthcare spending, total healthcare expenditures reached more than $24,000 per household in 2024 - surpassing shelter as the single largest expense category when accounting for additional data. Much of this spending is less visible to consumers but ultimately borne through lower wages and higher taxes.
• Housing remains the largest consumer out-of-pocket cost. Rent and mortgage payments are the biggest direct expense for households and have risen substantially since 2013.
• Food and transportation are significant cost drivers. These categories consistently rank among the top household expenses and have seen notable increases over the past decade.
• Lower-income households face persistent gaps between income and expenses. Households in the bottom two income quintiles, on average, spend more than they earn annually, leaving them dependent on savings drawdowns or credit to manage routine and unexpected costs.
• Credit card interest is a modest share of total spending. Average annual credit card interest payments were approximately $1,180 per household in 2024 - small relative to total household expenditures nearing $80,000. Annual and late fees represent well under one percent of total spending.

The report also highlights that nearly 40 percent of households have less than $1,000 in liquid savings, making them particularly vulnerable to income disruptions or unexpected expenses such as car repairs or medical bills. For many lower-income households - especially renters without access to home equity - credit cards serve as a primary and widely available tool for smoothing financial shocks.

What They're Saying

As Dr. Alexandrov explains in the white paper:

"Four spending categories both account for a large share of household budgets and have grown substantially over time: shelter, healthcare, food, and vehicles. Together, they represent the majority of household expenditures, particularly for lower and middle income households. Any policy solution aiming to make a notable dent in Americans' expenses must address at least one of these four structural cost drivers."

"Finally, capping credit card APRs is a recurring proposal in recent years. From a magnitude perspective, aggregate data suggest that such a policy would be unlikely to materially alter overall affordability trends. Credit card interest is not among the largest household expense categories."

Policy Implications

The research cautions that policies focused primarily on capping credit card interest rates are unlikely to materially improve overall affordability outcomes and could reduce access to credit for higher-risk borrowers who rely on it most.

Instead, the data suggests that durable improvements in household financial resilience will require addressing structural cost drivers in shelter, healthcare, food, and transportation. Policy options discussed in the white paper include increasing housing supply, enhancing healthcare price transparency, encouraging competition in key markets, and maintaining access to responsible consumer credit.

About the Author

Dr. Alexandrov is a Ph.D. economist with leadership experience in federal economic research, including senior roles at the Federal Housing Finance Agency and the Consumer Financial Protection Bureau. His work on consumer finance, housing markets, and household behavior is widely published and cited.

Dive Deeper

To read the full white paper, click HERE.