How Much Credit Cards Companies Earn With Late Fees? |
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Have you ever wondered how much money credit cards companies makes? Have you ever wondered how much of that comes from late fees? Everyone has and if you haven't you should because most likely you own credit cards, which mean that these late fees has or could directly affect you.
A new study confirms what many shoppers have long suspected: credit cards fees are skyrocketing. The study found late fees have jumped as high as $39 -- a penalty that is assessed in addition to finance charges. Credit card issuers frequently charge the fee if payment is only a single day late, or in some cases, a few hours late, the study found. As you have probably taken notice, credit card late fees are on the rise. There is enormous competitive pressure on credit-card interest rates and annual fees, which has caused a fee frenzy. For credit card issuers, late fees now represent their third largest revenue stream, (interest revenues and merchant fees rank first and second, respectively). In essence, those who pay late are now covering the costs for those credit cards users who do not carry a revolving balance and those who file for bankruptcy. So how much are credit cards companies making from issuing late fees? Over the years, the number of late fees charged to consumers jumped to record-high levels. Late fees can range from $10 to $40. The average late fee more than doubled since 1996 from $13.28 to $29.84. In fact, many major card issuers are now charging a $35 late fee. Let's assume that 100,000 people made late payments for a particular month and they were charged a late fee of $30 for doing so. This would add up to $3 million in revenue. As you can see, credit cards companies are making a lot of money off of cardholders and there is no slow down in sight regarding the increase in late fees. Often, the late fee is actually higher than the minimum payment required by the company. For example, a consumer with a $1,200 balance on a Chase credit card would owe $24 as a minimum payment, but if that payment is late, a $35 fee kicks in. Credit card companies are making a killing off the late fees they issue to their customers and they don't mind doing it because their ultimate goal is to make money. They are like any other for-profit business in that they sell a product or service for revenue. In the case of credit card companies, the product happens to be credit. These companies aren't just some "thing" sucking up as much money as they can. These "things" are run by man. And wherever man is involved, greed also becomes involved. These people are just like you and me. They may have a family to support, bills to pay, etc. Most people don't work just for the pure enjoyment, but for money, a source of income. And the more income we achieve the easier and better our lives become, supposedly. Credit card companies are not backing down from increasing fees. They, for some reason, do not see us as people who make mistakes once in awhile or people with other priorities in our lives. They want their money and they want it now! This is the reason you should not back down either. Hit them where it hurts, their pocketbooks. If you know you will be late for a particular month, just use a skip a payment service because the credit cards companies will no longer be taking money from you, you will be taking money from them. One way to avoid late fees is to set up automatic payment of minimum balances using online bill-paying systems. And consumers who slip up just once often have luck calling and negotiating with their bank. If this is the first late fee you've ever had, call the bank they will probably waive it. But don't call up and start yelling. And if you are repeatedly late, you need to look at why you are late. |
