CREDIT CARD COMPANIES PILE UP $11.7 BILLION REVENUE IN PENALTIES IN 2003

July 14, 2004

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Card users, consumer advocates and some industry experts complain that banks are attempting to squeeze more and more revenue from consumers struggling to make ends meet. Instead of cutting these people off as bad credit risks, banks are letting them spend — and then hitting them with larger penalties for running up their credit, going over their credit limits, paying late and getting cash advances.

“People think they are being swindled,” says industry consultant Duncan MacDonald, formerly a lawyer for the credit-card division of Citigroup Inc.

Cardweb.com, a consulting group that tracks the card industry, says credit-card fees, including those from retailers, rose to 33.4 percent of total credit-card revenue in 2003. That was up from 27.9 percent in 2000 and just 16.1 percent in 1996.

The average monthly late fee hit $32.01 in May, up from $30.29 a year earlier and $13.30 in May 1996, the company said. In 2003, the credit-card industry reaped $11.7 billion from penalty fees, up 9 percent from $10.7 billion a year earlier, according to Robert Hammer, an industry consultant.

SOURCE: Mitchell Pacelle, The Wall Street Journal