Card penalty fees drop again

THOUSAND OAKS, CA (January 3, 2016) — Card industry adviser, R.K. Hammer, reports that while total card fee income is up, “penalty fees” paid by consumers last year took another dip.

After rising predictably year/year for most of the last decade, 2010 saw the first penalty fee decline, down from $22.9 B to $22.5 B, with 2011 showing a further drop to $19.4 B, 2012 dropping again to $17.8 B, 2013 falling to $12.0 B, 2014 at $11.7 B, and $11.5 B for 2015, according to the R.K. Hammer Card Penalty Fee Index, the lowest level since Hammer began tracking such fee trends.

As shown below, penalty fees have fallen by 50% in the past six years.

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The Research and Analysis division at R.K. Hammer (known as the Card Knowledge Factory®) calculates penalty fees paid by credit card members in the following categories:  late fees (the vast majority…90%+ of the total), over limit fees (which took a dive the last 6 years due to legislation on opting-in requirements) and NSF fees.  “Penalty Pricing” – the raising of APR’s for delinquent accounts – while a contributor to total income – is not taken into account for this calculation, as that would appear in the Interest Income category, not Fee Income.

R.K. Hammer company Founder and CEO Bob Hammer stated, “Year-over-year growth of penalty fees hit a wall that remains to this day, starting five years ago, largely due to aggressive new regulations. However, as the card industry continues to look for ways to boost fee income, new fees where none existed before will be implemented. We know of no card issuer not presently weighing its fee pricing options or implementing higher/new fees, where permissible; by how much and how soon, of course, varies widely by issuer and their respective strategy.  Some who opt not to raise fees are looking to cement card member relationships and raise card member satisfaction levels.”

“Six years ago, about the time that the economy was tanking and new card legislation was emerging, we predicted ten areas where some issuers would  likely consider charging or raising existing fees; five of those ten have already been implemented by some card organizations:  customer service call fees (after some threshold number are exceeded in a given billing cycle, especially for subprime accounts); raising the cash advance fee; inactive account fees (or closing those accounts); delinquent payment “default pricing”; second card or replacement plastic fees; and fees for receiving paper statements (waived under certain deposit balance level minimums or debit activity usage levels).”

“Moreover, we recognize that not everyone has the same objectives for their card business.  Importantly, those issuers who choose not to enhance their fee-based pricing may perceive better card member loyalty and satisfaction ratings, but they do so at the risk of lower profitability than would otherwise be possible.  For those who choose to offer the card product line as a member benefit and not a pure profit center, the decision not to fully price the product may help achieve that corporate objective.  It is a two edged sword, a thin tightrope one walks when deciding whether to raise fees on card members or not.”

“What is still on the horizon for those in the card space and much less certain is to what extent the CFPB will exercise its new regulatory and oversight powers and suggests even more changes to the industry.

It is R.K. Hammer’s take that the odds remain vanishingly small that no more changes will occur for us in the card business.  Much of what we see lately is a review of marketing tactics, and whether FI’s actually deliver what was promised in the pitch, and how it was promised to be delivered.”

Every card issuer would therefore be very wise to do their own similar internal compliance due diligence review, asking the key question, ”With every product or service we supply to a card member is what we deliver exactly what we promised, and how we promised to provide it.”  Not doing this risks incurring the regulatory oversight intrusion that frankly might have been otherwise avoided.

Result of all the foregoing:  “total” fee income will continue to rise, but “penalty fees” will likely remain flat y/y in 2016.

About Card Knowledge Factory

Card Knowledge Factory® is a premier provider of card industry data metrics and trend reports, from the Research and Analysis division of R.K. Hammer.  Their opinions, white papers and card research findings have been published in the financial press 715 times in the U.S. and abroad, and are designed to provide card executives with timely insights into events and trends occurring in the business.   Founder and CEO Bob Hammer serves as expert witness for issuers in litigation, conducts interim management for issuers in transition, and values and brokers card deals.  He has personally trained over 1,000 card managers from 50 countries in best practices card management and card portfolio valuations.  R.K. Hammer has a menu of reports and historic data metrics available at


Robert Hammer
R.K. Hammer
(805) 444-5725

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