While promotional credit card pricing continues to reach historical lows, card issuers are continuing to jack-up back-end fees and pump-up punitive interest rates. Other yield tweaking includes the use of the two-cycle interest calculation method, the use of a daily periodic rate to compound interest charges, shortening of grace periods and the creation of new fees. According to the upcoming January issue of CardTrak ([www.cardtrak.com]), credit card fee income has grown 79% over the past two years while interest income has only increased by 9.8%. The growth in fee income is linked to higher late fees and over-limit fees. According to CardData ([www.carddata.com]) late payment fees have soared 58% over the past 24 months, from an average of $13.88 to $21.94. Among the top ten issuers late payment fees now average $26.10. Industry-wide, over-limit fees now average $21.02, up 53% since Nov. 96. Among the top 10 issuers, over-limit fees now average $25.70. Some issuers are imposing fees for closing an account, not using an account for at least six months and for customer service.
FEE INCOME INTEREST INCOME
1998: $17.9B (+20.9%) 1998: $57.4B (+8.0%)
1997: $14.8B (+48.0%) 1997: $53.1B (+1.5%)
1996: $10.0B (+20.5%) 1996: $52.3B (+23.9%)
1995: $ 8.3B (+13.7%) 1995: $42.2B (+21.3%)
1994 $ 7.3B NA 1994: $34.8B NA
Source: CardTrak (www.cardtrak.com) and CardData
(www.carddata.com) both services of CardWeb, Inc.