American Express Co. and Discover Financial Services are eliminating overlimit fees on consumer credit cards, in one of the first concrete examples of how a new law will restrict issuers' abilities to turn a profit.
In so doing, they may lead the way for other issuers to give up on overlimit fees, a relatively small but useful source of fee income, observers said.
"Issuers should take overlimit fee income out of their P&Ls," said Philip J. Philliou, a former Amex executive and a partner in the Philliou Selwanes Partners LLC consulting firm. "Under the best of circumstances, it's a much more limited income stream than in years past, and this additional hurdle of assessing the fee" under the new law "begs the question of whether it's efficient and practical" to do so.
Amex started informing cardholders this month that it would eliminate overlimit fees on all of its consumer credit cards with its Oct. 1 billing statements. Desiree Fish, a spokeswoman for the New York credit card company, said Friday that it will continue to make point-of-sale decisions about whether or not to allow cardholders to make purchases that exceed their spending limit, but will no longer assess a fee to those who are permitted to complete their purchase.
"To continue to offer them on those who opt-in would be more expensive," Fish said. "We just don't rely as heavily on those fees, and it's not going to be as much of a financial impact for us as it would have been to put in that whole opt-in situation." ..cont'd
http://www.americanbanker.com/issues/174_152/law_hits_home_as_cards_opt_out_of_overlimit_fees-1000795-1.html