LowCards.com points out that fees are a huge source of revenue for credit card companies these days—they’ve gone from $12.8 billion in 2003 to $18.1 billion in 2007, an increase of 41% in 4 years. They write, “”During this time of lower interest rates and more defaults, fees provide a steady income for issuers.”
Fees now account for 39% of the revenue for credit card issuers according to RK Hammer, a bank card advisory firm.
One fee that is expanding and receiving attention is the over the limit fee. Several years ago, it was a straightforward fee–if you went over your credit limit one month, you were charged an over the limit fee. In most cases, your card was declined if your account was over the limit when you tried to make a purchase. Now most issuers will allow you to keep charging even if you are over the limit, and they have expanded the penalty. If you exceed your credit limit, you will pay the fee and might be assessed the default rate that is over 30% for most cards.
This is a steep penalty. For example, if your card has 14% rate and you carry a $5,000 balance, you will pay approximately $700 per year in interest. If your rate is increased to 30%, you will pay $1500 per year in interest.
In response to increased government scrutiny, credit card companies have pulled out the old “customers will suffer for it if you make us change anything” threat:
They argue that forced changes could have unintended consequences for consumers such as more expensive credit with higher rates or that it could be more difficult for consumers to get credit.