Some Credit Cards Issuers Are In The Process Of Testing Out New Consumer Fees

Tuesday, January 31st, 2012

Because of the CARD Act, credit card issuers are not making as much money as they are used to. As a result, many lenders are toying with the notion of charging cardholders for services that have previously been free.

Many analysts claim that ever since the Credit Card Accountability, Responsibility and Disclosure Act went into effect last year, credit card issuers have been quietly attempting to figure out ways to recoup some of the revenue that has been lost as a result of the new regulations. Some credit card companies have even taken to testing out a variety of new fees.

In 2011, 90% of all fees levied upon cardholders were attributed to payment lateness, a statistic provided by the credit card consulting firm RK Hammer and reported by the online news source Collections & Credit Risk. That is an increase from 2010’s 80%, which was before the CARD act prohibited lenders from slapping certain other fees on cardholders, including penalties for making charges over preset credit line limits.

Overall, the percentage of income generated for the credit card industry from fees dropped some 13.8% last year to $19.4 billion as compared to the $22.5 billion it earned by way of fees in 2010, as indicated by data released by RK Hammer, according to Collections & Credit Risk.

“We know of no card issuer not weighing its fee-pricing options or implementing new fees,” said Robert Hammer, the firm’s chairman and CEO.

Currently, several card issuers are searching for ways to implement new fees that will be allowable under the CARD act, and many are in the process of testing them out. If adopted, these fees will affect a variety of different services that were heretofore offered to cardholders at no cost. Some of the fees being considered are charges for replacing lost or stolen cards or adding a second card onto an account, charges for calls placed to customer service agents, charges for receiving paper statements in the mail and additional charges for cash advances taken against the account.

Although many experts have voiced concerns that issuers may begin increasing annual fees on a multitude of cards in their efforts to make up some of the lost income, one study which was conducted by the Pew Safe Credit Cards Project found no immediate cause for alarm, as when annual fees in January 2011 were compared to those from March 2010 there were no major changes.

Also, it should be kept in mind that because banks collect more interchange money from credit card transactions than debit card transactions, which means that ultimately issuers want to encourage more consumers to spend with their credit cards instead of discouraging them with too many extraneous fees.

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