A report released earlier this week by R.K. Hammer showed that card fee income as a percent of total income remained flat in 2013, though it still accounts for a majority of income for card companies.
In previous years, interest income on prime and super prime cards contributed the largest portion of the card industry’s revenue. The report showed that the difference between interest income and fee income for prime and super prime accounts has narrowed in recent years.
“The R.K. Hammer card revenue model estimates that 55 percent of the card industry’s total revenue last year came from fees, with 45 percent from interest; rarely has the card fees trend line intersected the revenue line from interest—except for 2011 and 2012,” the report said. “A combination of declining outstanding card loans these past four years which in turn reduced interest earned, plus legislation on how rates may not be changed and cautious consumers caused the amount of interest income to decline. Interest was falling, while fees were rising, a growing trend written about often in the past.”
The report said that, compared to prime and superprime card metrics, subprime card metrics show much higher fee income as a percentage of total income—often as high as 80 percent or more of total revenue.