Fee-normous

You don’t have to be a dawdler to be penalized by your credit card company anymore. For years, card issuers have charged customers two kinds of fees: a late fee if they submit their monthly payment after the deadline, and in some cases an annual fee to use the card.

Now, card companies are adding penalties for customers who transfer balances to their cards, exceed their spending limit and charge cash advances.

Some companies are even charging customers between $5 and $15 if they pay their bill over the telephone.

In addition, card issuers are shortening billing cycles, enforcing strict payment deadlines and jacking up late fees.

The result: The credit card industry collected $43 billion in fee income in 2003, up from $39 billion in 2002, according to R.K. Hammer Investment Bankers, a credit card advisory firm in Thousand Oaks, Calif.

Fees composed 35 percent of the industry’s income in 2003, almost twice as much as in 1995, the firm reported.

“Fee income is becoming more important to the industry,” said Robert K. Hammer, the firm’s chairman and chief executive officer.

Card companies still make most of their money from interest income, but it is steadily declining, Mr. Hammer said.

“The interest income is going down and the fee income is going up,” he said.

Just over half of all Americans have at least one credit card on which they do not pay off the full amount, according to an April Gallup Poll.

Another 29 percent said they have at least one card, but said they always pay the full amount they owe each month.

The average outstanding balance — the amount that credit card owners say they will not pay off this month — is $3,815 among credit card holders.

The average American has about two bank-issued credit cards and about three retail credit cards, according to CardWeb.com Inc., a Frederick, Md., research company.

Card issuers today charge an average late fee of $32, up from about $27 three years ago, CardWeb reported.

It is becoming harder for customers to avoid delinquency.

Card companies have shrunk their billing cycles, giving customers less time to mail their payment from the time they receive their statement in the mail, according to Linda Sherry, editorial director for Consumer Action, a nonprofit consumer advocacy group in San Francisco.

The time between a credit account’s monthly closing date and the time when it is due — typically referred to as a “grace period” in the industry — has shrunk from about 27 days in 1993 to about 20 days last year, according to CardWeb.

Ms. Sherry said her group’s research shows companies also are enforcing strict payment deadlines.

For example, if a payment arrives at 3 p.m. on the day it is due, the company may consider it late because it was not in its hands by 10 a.m., she said.

Customers who submit late payments not only pay a fee, they also face the prospect of having their card “repriced” with a higher interest rate, Ms. Sherry said.

“Even if you are late just once, it can be enough to trigger a repricing,” she said.

These days, customers may see their interest rate raised even if they are late on another company’s account.

“If you are late paying card A, card B may notice and up your rate,” Ms. Sherry said.

Newer fees are soaring with late fees.

For example, over-the-limit fees are up 17 percent over three years, CardWeb reported.

American Express has raised the fee it charges customers who go over their spending limit to $35 from $29 last year, according to Bankrate.com, a personal finance Web site.

Bank of America Corp. charges its card holders a $35 over-the-limit fee, even if the customer goes over his or her credit line by just $1, Bankrate reported.

Citibank, Bank One Corp. and American Express Co. also charge customers who go beyond their credit line a $35 fee, although Providian Financial Corp. gives its customers a free pass as long as they do not exceed their credit limit by 2 percent or more.

Representatives for the major card companies declined comment or did not return telephone calls yesterday.

The best way to avoid getting socked by hefty fees is to make timely payments, said Greg McBride, Bankrate’s senior analyst. He recommends making payments online on the same day each month.

“Unless you remain really vigilant, it’s easy to get tripped up,” Mr. McBride said.

Consumers shouldn’t necessarily abandon their credit card company just because it charges multiple fees, Ms. Sherry said.

Card issuers are more willing to waive fees for longtime customers. It could be risky for customers to transfer their balance from one company that charges multiple fees to a card issuer that does not, she said.

“Believe it or not, there is a loyalty factor here,” Ms. Sherry said.