Are you a transactor or revolver?

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In the credit-card industry, the well-to-do are known as transactors. They pay off their balance in full every month, avoiding late fees and interest charges. They use credit cards as a convenient payment method, and as a way to earn travel points, cash back, airport-lounge vouchers, seat upgrades, and other goodies.

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In contrast, the have-nots are known as revolvers. Revolvers are subprime borrowers who use credit cards as a payment tool and as a short-term loan, to cover surprise expenses and groceries the week before payday. Such customers tend to take out no-frills cards, without lavish cash-back rewards and travel points. They also tend to carry a balance from month to month, and sometimes from month to month to month to month.

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The American consumer is tapped out. Grocery prices are bananas, housing prices are obscene, out-of-pocket medical expenses are absurd, and child care is impossible to afford, if you can find it. To keep up with the basics, let alone the Joneses, American consumers have been charging more and more to their cards. Credit-card balances stand at an all-time high of $1.2 trillion, up more than 7 percent year-on-year, and the share of borrowers who are late on their payments has reached its highest point since the aftermath of the Great Recession.

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