Credit card issuers quietly are testing a variety of new fees to help make up for other fee income wiped out last year when the Credit Card Accountability, Responsibility and Disclosure Act went into effect, one analyst contends.
Late fees last year comprised some 90% of all so-called cardholder “penalty” fees, according to RK Hammer, a Thousand Oaks, Calif.-based credit card consulting firm. That is down from 80% in 2010, before the CARD Act banned issuers from charging cardholders certain other fees, including penalties for exceeding preset credit limits.
Total penalty fee income last year fell 13.8%, to $19.4 billion from $22.5 billion in 2010, according to RK Hammer, which analyzes combined annual bankcard and private-label card revenues using a combination of public and private sources.
Now certain card issuers are in the process of testing or are considering fees for a wide variety of services that previously were free, Robert Hammer, the firm’s chairman and CEO, tells PaymentsSource. He declined to name the issuers weighing such fees.
The fees issuers are discussing include charges for calls to customer service; for cash advances, where fees from some issuers last year reached as high as 5% of the amount advanced; for replacing cards or adding a second card; and for receiving paper statements, Hammer says.
“We know of no card issuer not weighing its fee-pricing options or implementing new fees,” he says.
But clear evidence of such fees has yet to emerge.
Despite concerns that issuers might increase annual fees significantly to make up for lost fees, a study the Pew Safe Credit Cards Project conducted last year found no major changes in credit card fees in January 2011 compared with March 2010.
Moreover, because banks earn more interchange from credit card use than debit cards, particularly in the wake of new Federal Reserve rules capping debit interchange for large issuers, there is little motivation to discourage consumers from using credit cards.
“Card issuers still have an opportunity to earn more revenue from credit cards than debit cards, so they will continue to push them,” Brian Riley, senior research director with TowerGroup, tells PaymentsSource.
Hammer says the new fees issuers are considering vary widely by issuer, but new fees eventually will become the norm “as issuers strive to restore the strength of their balance sheets and income statements in coming years, responding to the barrage of attacks on their past business models and adapting to the ‘new normal’ in credit card oversight.
