Revenues From Bank Fees Up 41% Over Last 4 Years

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.

“Revenues from Bank Fees Up 41% in Four Years “ [LowCards.com]
(Photo: Getty)

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  1. dtmoore says:

    I’ve noticed not only increases in fees with my accounts, but also fees for things that never had fees before. Just the other day I saw a $10 transfer charger when I transferred money between two of my accounts. I called them up and asked about it and they said it was a new policy and they could not reverse the charge. Pretty shady imo.

  2. stinerman says:

    @dtmoore:

    Shady? Certainly not! Didn’t you read all the fine print on the last contract amendment they sent you in the mail?

  3. Parting says:

    39% of profit in fees, WOW
    :O

    Where can I open a credit card?

  4. Parting says:

    @stinerman: in a big brochure in smaaaal letters.

    I’ve got one and I’ve read it. Now I have to be more careful around new fees…

    My favorite : I there is a credit balance for 12 month (and you don’t use this card), MC will charge you 25$.

    Now imagine: you forgot you had a credit balance, let’s say 2$. MC net charge will be 23$.

    Not only CITI gets to keep interest gained on your credit balance, they will eat it and charge you even more.

  5. mobilehavoc says:

    In this day and age where you can track your account limit/balance online, get text alerts, even check it on your phone…anybody who still goes over their credit limit TOTALLY deserves to be raped by the bank.

  6. azntg says:

    @mobilehavoc: I would agree with you wholeheartedly if the reality was that cut and dry. It’s not.

    Fact is: Banks and creditors don’t exactly play fair even with all those “features” and “courtesies.”

    For example: Payments mysteriously “disappearing” or being withheld (even beyond the 1-3 posting day disclaimer that some creditors have). Overlimit right there if your statement balance was close to the credit limit.

    Or how about a CLD without notice? This isn’t too uncommon either. Your CL gets decreased to $50 above your current balance and in some circumstances, you won’t find out until it’s too late. Overlimit no matter what balance you had.

  7. guspaz says:

    See, the solution to that in Quebec would be to switch banks to Caisse Populaire Desjardins. They’re a credit union, so they tend to just give the profits back to their customers.

    Of course, in the US you have strange laws that ban credit unions from letting anybody join, so I guess that’s not really a solution down there. But up here, Desjardins has become the single largest credit union in all of North America.

    See? Socialism can be beneficial in moderation ;)

  8. nybiker says:

    @dtmoore: Were you doing a simple online transfer between your saving account and your checking account? Were you at your bank’s atm? What bank is it? That way the rest of us can avoid them.