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Credit card late fees

Prior to the COVID-19 pandemic, consumers had steadily been paying more in credit card late fees each year—peaking at over $14 billion in 2019. Late fees assessed by issuers declined to about $12 billion in 2020 given record-high payment rates and public and private relief efforts. Even during the pandemic, late fees accounted for over one-tenth of the $120 billion consumers pay in credit card interest and fees annually. In 2021, late fees were on the rise again.

In this report, we find the credit card market continues to rely on revenue from late fees disproportionately paid by economically vulnerable consumers. Cardholders with subprime and deep subprime scores are far more likely to incur repeat late fees in a given year than those in higher credit score tiers. Credit card late fees disproportionately burden consumers in low-income and majority-Black neighborhoods. Furthermore, these penalty fees can represent a surcharge of 24 percent annualized on top of assessed interest.

While the degree to which companies rely on revenue on late payment varies, late fees represent a larger share of revenue for issuers primarily serving consumers with lower credit scores than for issuers that extend little to no credit to such consumers. Most smaller banks and credit unions charge a maximum late fee of $25 or less, but almost all of the largest credit card issuers contract at or near the higher fee amounts that are permitted by regulation.

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