Credit card industry fees trend rises

THOUSAND OAKS, CA (January 26, 2015) — Anyone paying attention knows credit unions and banks have had their card interest income business models under siege since 2008.  So it no surprise that renewed attention has been turned instead to fee income models, and ways to boost that increasingly important revenue stream.

R.K. Hammer, in this 3rd of their annual series of 2014 year-end card industry reports, estimates that the card business saw a fee income increase of $10.4 billion in 2014 compared to 2013. New regulations and legislation continue to have some impact, just not to the same extent as a few years back. Post-recession card fees had been fairly flat for the past five years, according to R.K. Hammer, prior to 2014.

All Credit Card Fees in Year                    Trend

  • 2014      $90.3 Billion                         Up
  • 2013      $79.9 Billion                         Flat        
  • 2012      $82.5 Billion                         Flat
  • 2011      $81.2 Billion                         Flat
  • 2010      $78.4 Billion                         Flat
  • 2009      $78.9 Billion                         Up

Source: R.K. Hammer/Card Knowledge Factory® 2015

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 (i.e., ancillary services, insurance products), in that descending order. There are other far smaller fees, but those are not estimated in the R.K. Hammer financial model(s), off the radar screen. While penalty fees were flat last year, every other component of fee income showed Y/Y gains in 2014, especially in Interchange with higher consumer spending coming back.

While penalty fees garner much attention, it is actually card system Interchange that is always the largest component of fee income revenue stream, driven by recently renewed consumer spending.

Think card fees will go away soon? Sure…just as soon as new airline and hotel fees evaporate. It’s just not going to happen. Whatever services you may be getting for free today will be ultimately priced into new products tomorrow as add-on’s. Regulations changed business models, and business models then adapt. Econ 101. No surprise here.

Smart issuers draw a steady bead on what their card members want and will pay for, by consistently measuring their pulse with online polls, web-based surveys and focus groups. Those who do not invest in such information-rich technology tools on a consistent basis will find themselves at a competitive disadvantage to their peers in 2015 and beyond.

As stated before by Hammer, “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 (importantly, in the card members eyes)Importantly, if we are to charge or raise fees, as an industry we have to be sure we are giving true value to those card members as a result.”

For a more complete series of 2014 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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