Consumer Payment Card News

Over-Limit Fees

The growth in fees for exceeding the credit limit slowed down last year as the average crossed the $30 milestone. However, more top issuers, such as MBNA and Chase, are now charging fees for exceeding the credit limit at any time during the billing cycle. Previously, most issuers would only assess an over-limit fee if the closing balance for the month was above the credit line. Consumers near their credit limits should be also aware that finance charges added to the account after the close of the current billing cycle can cause an over-limit status, even if the minimum payment has already been posted. Some issuers, such as Bank of America, have begun raising minimum payments so that finance charges are repaid each month.

During 2004, the average over-limit fee increased 3.8%, compared to 4.8% in 2003, and 32.3% in 1997. Between 1994 and 1999, over-limit fees grew 96%, from $12.75 to $24.96. After a huge run-up in 1997 and 1998, over-limit fees quickly downshifted, increasing 17% over the past five years. On June 3, 1996 the U.S. Supreme Court ruled that card fees should be treated the same as interest rates when it comes to the preemption of state laws. Previously, the Supreme Court ruled commercial banks may charge interest rates on credit cards subject to the limitations imposed by the bank’s home state or issuing state, not the cardholder’s state of residence. The ruling gave the same protection to fees associated with a bank credit card program. During 2004, the most common over-limit fee among major issuers was $35, although some issuers charge $39 for accounts with higher balances.

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|_3. OVER-LIMIT FEE HISTORICAL |
|_. Year | Average | Y/Y CNHG |
|_. 1994: | $12.75 | +2.6% |
|_. 1995: | $13.20 | +3.5% |
|_. 1996: | $13.94 | +5.6% |
|_. 1997: | $18.44 | +32.3% |
|_. 1998: | $21.14 | +14.4% |
|_. 1999: | $24.96 | +18.1% |
|_. 2000: | $25.99 | + 4.1% |
|_. 2001: | $26.88 | + 3.4% |
|_. 2002: | $27.89 | + 3.8% |
|_. 2003: | $29.23 | + 4.8% |
|_. 2004: | $30.35 | + 3.8% |
|_3. Source: CardData (www.carddata.com) |

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