> What would happen is there would be no credit cards for anyone. Nobody is going to lend money to the general public at 5% for unsecured debt.
Credit cards are a single product that serve a lot of different use cases simultaneously, and credit card issuers are able to profit off of most of those through different mechanisms. Not everyone carries a balance on credit cards, including some of the most lucrative market segments[0].
Furthermore, BNPL is an example of lending money to the general public at 5% (or less, in many cases) for unsecured debt. In that case they make their money back on fees for late payments.
> In that case they make their money back on fees for late payments.
Not primarily accurate; several BNPL providers don't even have a late payment fee. BNPL manufactures ~25% APR debt out of 0% consumer contribution and ~6% merchant discount (interchange) which, since BNPL payments revolve very quickly, annualizes quite healthily. The primary source of revenue to the BNPL provider was historically keeping a portion of the discount for themselves; the rest compensates the capital provider, who is usually not the BNPL itself.
From this comes a fairly important realization that if you don't have a second party (the business) funding the cost of credit, or if the extension of credit is for a weighted average of longer than 3 weeks, it is in fact quite difficult to provide unsecured credit to the general public at ~5%.
Credit cards are a single product that serve a lot of different use cases simultaneously, and credit card issuers are able to profit off of most of those through different mechanisms. Not everyone carries a balance on credit cards, including some of the most lucrative market segments[0].
Furthermore, BNPL is an example of lending money to the general public at 5% (or less, in many cases) for unsecured debt. In that case they make their money back on fees for late payments.
[0] If you'd like an overview of how credit cards make money, this post from patio11 covers the basics: https://www.bitsaboutmoney.com/archive/how-credit-cards-make...