Credit Card eZine - News and Articles about Credit Cards

Credit Companies Revenues

Monday, May 12, 2008

Like any other businesses, credit card companies have their sources of revenues, i.e. interests, and fees. According to Wall Street Journal, credit companies' revenues from fees increased by 41% over the last four years. Now, it is $18.1 billion compared with $17.2 billion last year. Since 2003, there's a 41% increase in fee revenues. Meaning, for banks and companies, credit card fees provide a steady growth of income. Today, fees account for approximately 40% of the total revenue for card issuers. Now, customers notice not only increases in credit fees but also the appearance of some new fees for things that never had them before.

Despite of tough economic times, various credit card fees are a reliable source of income for creditors. Roughly speaking, lenders gain more profits taking advantage of other people's financial problems. Let's take a closer look at some fees and how they change over the years! Take for example, over-limit fees.

Not long ago it's was a straightforward fee so that it was next to impossible to make a purchase if you had gone over your credit limit. These days however most card issuers allow customers charging money even if their credit account is over the limit. Over-limit fees expand over the time respectively. Unfortunately, when exceeding your credit limit, you can face extremely high default rates on your cards on top of that.

Sometimes, they may be as high as 30%. And it becomes a big headache for many customers today. To be in lenders' good graces is really not so easy, especially now when the economy is weak. More and more customers charge more on their cards regardless of increasing default rates, and various fees, including late credit fees, over-limit fees and others. For some people, plastics are the only lifesaver they can rely upon.

In the meantime, banks and companies are rubbing their hands in utter delight. Increasingly, card companies start boosting some credit fees associated with more risk, including late credit fees, default interest rates. Interestingly, but some lenders start charging ATM fees for cardholders of other banks' clients.

Once you have decided to shift your balance onto a low-rate card, take a closer look at a balance transfer fee. It's true that some balance transfer credit cards may stand you a good turn when eliminating your heavy credit card debts. But the thing is, some banks start charging this fee even though they haven't charged it before, and for most cardholders these fees become a nasty surprise.

Before applying for a new credit card, read the fine print carefully to understand the terms and conditions of your credit card agreement. Now that we face hard times, it would be a wise thing to do in order to avoid further unexpected problems with your credit card accounts.