Revenues from Bank Fees Up 41% in Four Years!

[napi21]

by Bill Hardekopf
A look at how fees are affecting consumers

Congress recently investigated the credit card industry. This
is becoming a tense issue for credit card companies as they
defend their use of fees. Despite the public protest and
scrutiny, fees are a reliable and growing source of revenue
for issuers during this tough economic time.

According to a February report in the "Wall Street Journal,"
revenue from fees increased from $17.1 billion in 2006 to
$18.1 billion in 2007.

In 2003, the revenue from fees was $12.8 billion. That
represents a 41% increase in fee revenue in just four years.
During this time of lower interest rates and more defaults,
fees provide a steady income for issuers.

Fees now account for 39% of the revenue for credit card
issuers according to RK Hammer, a bank card advisory firm.

One fee that is expanding and receiving attention is the over
the limit fee. Several years ago, it was a straightforward
fee. If you went over your credit limit one month, you were
charged an over the limit fee. In most cases, your card was
declined if your account was over the limit when you tried to
make a purchase. Now most issuers will allow you to keep
charging even if you are over the limit, and they have
expanded the penalty. If you exceed your credit limit, you
will pay the fee and might be assessed the default rate that
is over 30% for most cards.

This is a steep penalty. For example, if your card has 14%
rate and you carry a $5,000 balance, you will pay
approximately $700 per year in interest. If your rate is
increased to 30%, you will pay $1500 per year in interest.

Banks are also expanding the debit card/checking account
version of the over the limit fee, the overdraft policy. Most
banks charge over $30 every time a customer writes a check for
more money than exists in the account. Therefore, if you write
five bad checks, you are charged $150 in overdraft fees.

Several banks also have an extended overdraft policy. If your
account is in an overdraft situation for a period of time
(usually six days), you face an additional one-time fee that
can range from $30 to $42.

Yet another layer of overdraft fees is being discussed in the
banking industry. If a customer is in an overdraft situation
for an extended period of time, the customer may also be
charged an additional fee for every day that the account is
overdrawn. Beginning June 1, Compass Bank, a regional bank, is
charging overdrawn customers an additional $7 per day charge
from day seven to day thirty.

If you don't closely monitor your account, and your account is
overdrawn, this is going to be a very costly surprise when you
get your monthly statement.

Even though Congress and other agencies are investigating the
practices of the credit card industry and are expected to push
for changes, banks and issuers defend their practices and
oppose new regulation. They argue that forced changes could
have unintended consequences for consumers such as more
expensive credit with higher rates or that it could be more
difficult for consumers to get credit.

The bank fee policies for accounts and credit cards are a bit
repressive for those who are struggling to maintain their
accounts and keep up with their debt payments. They are the
ones who are most likely to have a problem and get penalized
with a hefty fee or default rate. However, the banks are
saying that the revenue from these higher rates and fees are
keeping costs down for all other consumers. Unfortunately,
times are tough for many households right now and more people
may soon find themselves caught in this rate and fee trap, but
have no other alternative for credit.
______________

Bill Hardekopf is the CEO of LowCards.com (
http://www.lowcards.com ), an independent website that helps
consumers easily compare credit cards in a variety of
categories such as lowest rates, rewards/rebates, balance
transfers and lowest introductory rates. It also gives an
unbiased ranking and review for each card, making it easy for
consumers to compare more than 150 credit card offers and
apply securely online. It provides advice about credit card
and debt issues, news, and credit card updates.

I received this info in an email from a group called Dollar Stretcher. I love using my cc's because of the rebates I get, but I always pay them off in full every month so it doesn't cost me ANYTHING and I get $$ back! Everyone really needs to be very careful how they use credit cards & debit cards! They can cost YOU a fortune!!!!

[truedelphi]

1. Credit cards are just a form of legalized usury

The rules change, you cannot be sure that even if you call the company and ask what the minimum payment is that you will be told anything near the truth.

And most people who have them think that they will use them wisely. Which works just ducky until someone in the household loses their job, and the $ 200 a month for the credit cards is not available.

[napi21]

2. You're right on the job loss problem, but I'm having a real problem understanding

why so many people OD their accounts. In emergencies I understand having to use the CC to survive, but I have the strong feeling that emergencies aren't the reason for a lot of these OD's. As I said, I pay mine off every month, but I've been in the time payment mode many years ago. I can tell you in my case, most of what was on those cc's were things that were a GREAT DEAL but also things I could have lived without! I got so aggrivated with how much I had to pay in interest every month I forced myself to pay them off and will NEVER do it again. If I see something that is TERRIFIC but I can't pay for it when the bill comes, I won't buy it!!!