Some U.S. credit card issuers started responding to the down economy halfway through 2009 by raising over-limit fees to make up for lost revenue. Charlotte, N.C.-based Bank of America Corp., for example, raised its over-limit fee to $39 by July from $15 in January, while Wichita, Kansas-based Intrust Bank and Wilmington (Del.) Trust Co. raised their fees to $35 from $29 during the same time period, according to PaymentsSource research.
Increasing fees was a practical approach to dealing with the economic crisis and the subsequent change in credit card regulation that is restricting how issuers make money, one observer says.
“Credit lines are being reduced, return on assets is in the tank, and the banks are looking for more revenue wherever they can grab it,” says Dennis Moroney, research director, bank cards, at Needham, Mass.-based Tower Group. “Combine this with [the fact that] people are under financial stress, out of work and are using their cards to live on. They go over limit and boom, they get hit with the fee.”
Some issuers, however, made the jump even earlier than 2009. Salt Lake City-based BMW Bank of North America raised its over-limit fee to $35 in January 2009 from $29 in July 2008, while San Francisco-based Wells Fargo & Co. raised its fee to $35 from $20 during the same timeframe.
These fee increases in response to market conditions are normal and cyclical, Moroney notes. “It’s like the pig and the snake problem–it’s just got to work its way through,” he says of issuers adjusting to the new regulation and the economy through fees. “We don’t’ see anything more magical than that.”
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