Card Fee Income Slips in Again as Interchange Income Soars

Card fee income decreased for the third consecutive year in 2019, while interchange income posted strong a double-digit gain. The decline for 2019 was directly attributable to reduced penalty fees (mostly late payments fees) and lower cash advance fees, driven by a robust economy with low unemployment and fairly stable consumer sentiment, according to CardData.

Income from credit card fees declined 8.5% YOY (year-on-year) while interchange income rose 10.6% YOY. Interchange fees collected from merchants and shared with the four major credit card networks (Visa, Mastercard, American Express, and Discover), as well as the companies processing transactions, soared to $52 billion in 2019, more than making up the income gap says R.K. Hammer Investments Bankers, experts in the sale and acquisition of credit card portfolios.

Based on the 2019 data interchange income is growing at a CAGR (compound annual growth rate) of 4.17%, according to analysis by RAM Research.

The dynamics of the U.S. credit card pricing model is rapidly changing as fierce competition has broken out in the justification for annual fees, coupled with some major issuers promoting cards with no late fees ever, says payments expert Professor Cardworthy.

Senior Analyst Robert McKinley of CardWeb and CardData notes interest income remains the profit center hitting $87.7 billion in 2019, bringing total U.S. credit card income to $178.9 billion (before expenses) for 2019.

Total U.S. Card Fee Income

Total U.S. credit card fee income declined 8.5% year-on-year (YOY) for end-of-year (EOY) 2019, compared to a 0.6% YOY decline for EOY 2019. Total U.S. credit card fee income was $91.2 billion for EOY 2019, compared to $99.7 billion for EOY 2018, and compared to $91.7 billion for EOY 2014.

Interchange

U.S. credit card interchange fee income increased 10.6% YOY for EOY 2019, compared to a 1.7% YOY gain for EOY 2018. U.S. credit card interchange fee income was $4520 billion for EOY 2019, compared to $47.0 billion for EOY 2018, and compared to $42.4 billion for EOY 2014.

Cash Advances

U.S. credit card cash advance fee income dropped 10.6% YOY for EOY 2019, compared to a 1.6% YOY decline for EOY 2018. U.S. credit card cash advance fee income was $16.0 billion for EOY 2019, compared to $17.7 billion for EOY 2018, and compared to $16.0 billion for EOY 2014.

Annual Fees

U.S. credit card annual fee income decreased 13.3% YOY for EOY 2019, compared to a 3.2% YOY drop for EOY 2018. U.S. credit card annual fee income was $13.0 billion for EOY 2019, compared to $15.0 billion for EOY 2018, and compared to $13.5 billion for EOY 2014.

Penalty Fees

U.S. credit card penalty fee income was flat YOY for EOY 2019, compared to a 9.1% YOY decrease for EOY 2018. U.S. credit card penalty fee income was $11.0 billion for EOY 2019, compared to $11.0 billion for EOY 2017, and compared to $11.7 billion for EOY 2014.

Enhancement Fees

U.S. credit card enhancement income dropped 11.1% YOY for EOY 2019, compared to an 8.4% YOY increase for EOY 2018. U.S. credit card enhancement income was $8.0 billion for EOY 2019, compared to $9.0 billion for EOY 2018, and compared to $8.1 billion for EOY 2014.