Card issuers relying on fees even more
Credit card issuers’ reliance on fees edged up another notch in 2007, according to the annual profit/loss estimate put out by respected credit card industry analyst and investment banker R.K. Hammer.
Of $160 billion in total revenue in 2007 industry-wide, Hammer estimates that $63 billion, or 39 percent, came as a result of fees. Fee revenue is up slightly from the 38 percent in 2006. It was just 28 percent in 2000.
Overall, Hammer estimates that in 2007, the industry was more profitable than any year since 1987.
“Profits are up due to receivables going up, fee income rising faster than expenses and more intelligent activation programs by savvy issuers,” Hammer told CreditCards.com in an e-mail.
As for 2008, he predicts “some spillover by the subprime mortgage meltdown, but nothing too earth-shattering. This year will bring record profits, but also record charge-offs, I predict. Those who pay attention can and will offset that risk.”
He’s an industry analyst, so his last remark applied to credit card issuers, but the same can be said for consumers: Pay attention, and don’t embrace too much risk by racking up credit card debt you can’t pay.