March 17, 2009

To offset the rising incidents of delinquencies and charge-offs, more banks are hiking their credit card fees or introducing new charges. This development is expected to boost the banks' income on penalty fees to $20.5 billion this year from $19 billion last year.Wells Fargo upped its late fees and cash advance charges, Chase added a $120 annual fee on some of its cards that charge low interest rates, while American Express hiked late fees for some of its business cards.

Robert Hammer, chairman of banking industry consultant R.K. Hammer explained to USA Today that higher fees merely recognizes banks' risks are increasing, and the financial institutions are not going just to observe their cost rise, but took action.The bank fee increase take place even if the Federal Reserve had reduced benchmark interest rates drastically, and there is a federal regulation that will take effect in 2010 which could make it difficult for card companies to adjust upward interest rates on existing credit card debt, according to Bill Hardekopf, chief executive officer of LowCards.com.