How Much Do Consumers Pay Annually In Credit Card Late Fees?

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Nov 28, 2016
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Credit Cards, Question of the Day, Research, Current Events, Chart of the Week

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Answer (from R.K. Hammer as reported in WSJ): Over $10 Billion in 2015

Other interesting facts from the WSJ article:

  • Lots of people are using their credit cards to access cash from ATMs which generated almost 2X more in fees than late fees:

By comparison, card issuers earned $25.1 billion in cash-advance fees last year.

  • About one in five card accounts incur a late fee:

Roughly 20% of active credit-card accounts incur a late fee, according to CFPB data. Based on numbers from industry newsletter Nilson Report, that represents about 170 million accounts.

  • These late fees are equivalent to amount that credit card companies earn from annual fees:

Credit-card companies collected $11.4 billion in penalty fees last year, according to R.K. Hammer Inc., a consulting firm that specializes in the payments industry. That isn’t far off the $11.8 billion they earned from annual fees, but its down by roughly half from 2009.

  • Some tips for avoiding late fees; find cards that waive late fees or request that card companies waive their fees:

Some issuers are trying to attract new customers by not charging late fees. Discover and Citigroup waive fees on a first late payment on certain cards. Pentagon Federal Credit Union’s Promise card advertises that it has no late fees. Consumers can often avoid late fees just by asking their card issuer to do so.“About 90% of people who ask for a late-fee waiver get it, but only about 25% of people even ask,” says Matt Schulz, senior industry analyst at CreditCards.com.

 

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

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