Credit Card Industry Fees Fairly Flat, as Predicted

(Thousand Oaks, CA) 1/14/2013 – Anyone near the credit card business knows credit unions and banks have had their interest income business models attacked since 2008 – prompted by a “perfect storm trilogy” of a depression-like recession, an improving yet still painful economic recovery with card members becoming more cautious in their spending habits, and legislative changes which forever altered what cards can and cannot do.

So is it any surprise that attention has been turned instead to fee income models?  We think not.  It was quite predictable as a response to those factors, and should have been known to all, well in advance.

R.K. Hammer, in this 3rd of their annual series of 7 year-end card industry reports, indicates that the card business saw a modest fee income increase of only $800 million in 2012, compared to 2011; $82.5 billion vs. $81.7 billion a year earlier.  This small increase was also limited by recent legislation on fee restrictions and fewer credit card transactions, with many cardholders having become more cautious.

The major components of fee income that R.K. Hammer calculates each year are Interchange Income, Penalty Fees, Cash Advance Fees, Annual Fees, and Enhancement Fee Income (ancillary services, i.e., insurance products).  There are other far smaller fees, but those are not estimated in the Hammer model(s).

Looking ahead, card issuers who recalibrate their business models more effectively will show higher fee income growth than others in their peer group.  How they do so, however, will determine who the leaders and who the laggards will become.  The recent debit card fee income debate shows that the importance of how one implements and communicates cardholder pricing changes are as important as the changes themselves.  Card issuer’s beware.

Savvy issuers will have a constant beat on what their card members want/and will pay for, by consistently measuring their pulse with polls, surveys and focus groups.  Those who do not invest in such information-rich technology tools will find themselves at a distinct disadvantage to their peers in 2013 and beyond.  As an industry, we’ve moved way beyond “Risk-based” pricing and “Cost- based” pricing into what we now term “Value-based” pricing, enhancing the value proposition of the product line.

For a more complete series of 2012 Fee Income metrics, go to the link on

More about R.K. Hammer and their Card Knowledge Factory®
R.K. Hammer’s Research and Analysis division, also now known as the Card Knowledge Factory®, has been providing actionable best practices information to credit card issuers throughout the U.S. and in 50 countries abroad for over two decades.  They have advised most of the top issuers in the U.S., served as expert witnesses for many card issuers in litigation, provided interim card management to banks and credit unions, and general card consulting for card companies who have a defined need for more effective/efficient card marketing.  Contact R.K. Hammer at

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