Top Credit Card Issuers Dole Out $67.9 Billion in Reward Payments in 2022, But Interchange Fees More Than Make Up for Them

Americans’ insatiable appetite for credit card rewards led the nation’s six biggest credit card issuers to pay out $67.9 billion in reward redemptions and partner payments in 2022, according to a LendingTree analysis of those banks’ annual filings. That’s a 23.7% jump from 2021 and a 55.0% increase from 2018.

Those filings also show that banks are keeping more money on the books to help cover those costs. But before you begin to feel sorry for the banks, know this: They’re also bringing in more so-called interchange fees that primarily power their rewards programs. After subtracting reward payouts and partner payments, the banks netted $31.9 billion in interchange fees in 2022, an 11.5% increase from the prior year and an 11.1% jump from 2018.

What does it all mean? Even as consumers rake in more credit card rewards, banks are still making money hand over fist.

Key findings

• The six largest issuers of credit cards in the U.S. paid $67.9 billion for reward redemption and partner payments in 2022, continuing a dramatic growth trend over the past five years. The 2022 numbers represent a 23.7% increase ($13.0 billion) from 2021 and a 55.0% increase ($24.1 billion) from 2018.
• The one exception to that trend was 2020. In the past five years, reward and partner payouts were lowest in 2020 at $42.6 billion among the six largest issuers, as pandemic lockdowns clamped Americans’ spending and brought travel to a near-halt. This represented a drop of 10.3% ($4.9 billion) compared to 2019. However, American cardholders roared back in 2021, with redemption payments skyrocketing 28.9% to $54.9 billion, and a cumulative 59.4% to $67.9 billion in 2022.
• The biggest issuers are deferring more and more revenue to cover future costs of yet-to-be-redeemed rewards. Four of the six largest issuers that reported so-called credit card rewards liabilities in their annual filings grew them by 52.5% ($11.4 billion) since 2019. The jump between 2020 and 2021 was more pronounced at 19.5%, while the differences between 2019 and 2020 and 2021 and 2022 were 13.4% and 12.6%, respectively.
• Despite the spike in reward and partner payouts, card issuers are netting more cash through interchange fees than any time in the past five years. These are the amounts charged to merchants to process credit card payments, and rewards payments are taken from these fees. The six biggest issuers netted $31.9 billion in 2022 after deducting rewards and partnership payments — that’s 35.7% ($8.4 billion) more than in 2020, even though rewards payouts were so much lower then.

Credit card rewards payouts spike to 5-year high

It’s no secret that Americans love their credit card rewards. Our analysis of annual filings from the nation’s six biggest credit card issuers — JPMorgan Chase, American Express, Citi, Capital One, Bank of America and Discover, according to credit card news and analysis publication The Nilson Report — shows that our love for rewards is paying off in a big way.

These six issuers, which account for 73% of consumer credit card purchase volume in the U.S., paid out $67.9 billion in card reward redemptions or partner payments in 2022. It’s unclear what percentage of that $67.9 billion went to cardholders and what percentage went to those with whom the issuer partners in running the program. Still, whatever the breakdown, there’s no question that consumers are taking in significant amounts of rewards value every year, and there’s no reason to think that’s going to stop anytime soon.

Credit card reward payouts and partner payments

Source: LendingTree analysis of annual filings.

Chase accounts for nearly a third of that $67.9 billion, paying out more than Capital One, Bank of America and Discover together. American Express and Citi had the second- and third-highest payouts in 2022.

Combining the six issuers, the payout totals were the highest in the past five years. The 2022 total was 55.0% higher than the 2018 total. In fact, each year since 2018 has seen year-to-year growth, except one — unsurprisingly, rewards payouts fell in 2020 as the pandemic kept Americans locked in their homes and reduced overall spending significantly. That year saw a 10.3% yearly drop, but it was short-lived. The next year saw a 28.9% increase, and the growth hasn’t stopped since.

Change in credit card reward payouts and partner payments (compared to 2022)

Source: LendingTree analysis of annual filings.

Credit card issuers’ rewards liabilities growing, too

Here’s the thing: Credit card rewards don’t get paid out as soon as they’re earned. They get saved or hoarded — or sometimes just forgotten. Banks don’t know when or if they’ll get used, and in what amounts.

That unpredictability creates a challenge for banks, and they deal with it by keeping extra money on the books (“deferred revenue”) to potentially put toward as-of-yet-unredeemed-rewards payouts.

That money is called their “rewards liability,” and we’re talking multiple billions of dollars for the biggest card issuers.

Reported liabilities for credit card rewards programs

Source: LendingTree analysis of annual filings.

While this information wasn’t readily available from all six issuers, the liabilities for the four available topped $33 billion — that’s an average of more than $8 billion per card issuer.

Those liabilities are steadily rising, too, up 12.6% from 2021 and a stunning 52.5% from 2019.

Change in reported liabilities for credit card rewards programs (compared to 2022)

Source: LendingTree analysis of annual filings.

We can’t know if liabilities will continue to grow at that pace, but it seems likely they’ll keep increasing to some degree in the near future. As cardholder spending increases, the number of reward points grows, too — as does the amount of unused points. That means banks need to hold more money back on their books to cover themselves if those points are eventually used.

Issuers netting more through interchange fees

It’s clear that rewards programs are costly ventures for credit card issuers, and they’re only getting more so. The good news for banks is that the fees they typically use to pay for these programs are growing, too.

So-called interchange fees (the fees that merchants pay to accept credit cards) are the fuel that primarily powers banks’ credit card rewards engines, and our report found that there’s certainly no fuel shortage here.

Even after accounting for rewards payouts, the big six credit card issuers took home $31.9 billion in interchange fees.

Interchange fees collected after deducting credit card reward payouts and partner payments

Source: LendingTree analysis of annual filings.

That’s 35.7% higher than in 2020 — obviously an anomalous year, as lockdowns dramatically reduced overall consumer spending and reward payouts fell sharply in part due to travel restrictions. (Revenue from interchange fees after reward payments were doled out was up 11.1% from 2018.)

Change in interchange fees collected after deducting credit card reward payouts and partner payments (compared to 2022)

Source: LendingTree analysis of annual filings.

The six credit card issuers’ average interchange-fee income (post-reward payouts) for 2022 was more than $5 billion, though American Express skews those numbers somewhat. Amex’s net earnings dwarf the others.

One of the main reasons: Unlike most other major credit card issuers, Amex is both a card-issuing bank and a credit card network. With most credit cards, those are two separate entities. For example, your new credit card may have been issued by Chase but its card network is Visa, or issued by Citi but its card network is Mastercard. However, for most American Express cards, Amex is both the issuer and the network — and that’s true of most Discover cards as well. When it comes to interchange fees, it means Amex gets to keep a bigger percentage than most of its competitors.

There’s another even simpler reason: American Express reportedly charges merchants slightly higher interchange fees than their competitors. In general, higher-end rewards cards tend to charge higher interchange fees — likely another reason why Amex and Chase may have higher net interchange fees than their biggest rivals. But, traditionally, Amex overall has tended to feature higher merchant fees than Mastercard, Visa and Discover.

When in doubt, use your rewards

For consumers, this report should serve as a call to arms to use your rewards. That doesn’t mean you should rush to spend them on something that doesn’t give you value, but you also shouldn’t just stockpile them endlessly like Scrooge McDuck’s gold coins. You’ve already earned those rewards by spending your money, so be sure to grab that extra value by using those rewards sooner rather than later.

Plus, credit card rewards tend to be a depreciating asset for consumers. Rewards programs from airlines, hotel chains and credit card issuers have been devalued many times over the years and will likely be again at some point. That means your points and miles will likely never be worth as much as today. So use them — even if it just saves you a few extra dollars, you’ll be glad you did.

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Methodology

LendingTree analysts reviewed annual Securities and Exchange Commission (SEC) Form 10-K filings by the six largest credit card issuers in the U.S. With this information, they determined the annual payments made by these issuers for rewards and partnership fees, as well as their declared liabilities for rewards programs each year and interchange fees received after accounting for rewards and partnership payments.

The six issuers are from The Nilson Report’s 2023 list of the biggest issuers of general purpose credit cards in the U.S. In order, they are:

• JPMorgan Chase
• American Express
• Citi
• Capital One
• Bank of America
• Discover

Citi and Bank of America didn’t report liabilities.