Penalty Fees Profit Center for Credit Card Companies
The Epoch Times has an article about the new credit card reform proposals - but it is the couple credit card statistics in the article that are very interesting to me.
- Credit card companies spent $1.2 billion in the first three quarters of 2007 on advertising alone.
- Credit card companies took in $18 billion in penalty fees in 2007 - “the major profit maker for credit card companies.”
It’s quite interesting that credit card penalties and late fees have become the major profit center for credit card companies because contract law generally prohibits collecting liquidated damages when the damage payment acts as an excess penalty to deter the breach of contract. The damage payment for breach of contract is supposed to reasonably reflect the expected amount of damage to the losing party - and that means that the law on credit card fees for late payment and other penalties is all out of whack.
