American Express Raises Late Payment Fee
The federal government recently raised the allowable limit on credit card late fees, and American Express is the first major credit card issuer to make this change.
In January, American Express will charge customers $38 if they are late on more than one payment in a six-month period. This is $1 more than the company’s previous highest fee, and is the maximum allowed under the Consumer Financial Protection Bureau’s new guidelines.
A simple $1 increase may not seem like much on a consumer scale, but for the card issuer, it could yield significant revenue in the future. American Express is still trying to recover from the loss of the Costco contract earlier this year, and every dollar makes a difference. Credit card companies collected $11.4 billion in penalty fees last year, and that number is expected to reach $12 billion in 2017.
American Express says this change is intended to recoup some of their collection costs, and should not affect many cardholders. “There are business costs associated with not paying on time, and late fees are intended to recapture some of that cost,” AmEx said in a statement. The company added that “a very small number” of cardholders miss more than one payment in a six-month time period.
Other credit card issuers have said they do not intend to raise their fees, according to The Wall Street Journal. J.P. Morgan Chase, Citigroup, Bank of America and Discover have all said their late fee will remain at $37, and Capital One said they intend to keep theirs at $35.
The 2009 Card Act first capped late fees at $35, which decreased the penalty-fee revenue for U.S. card companies. Before the Card Act, late fees averaged around $39.
According to CFPB data, about 20% of credit card accounts incur late fees.