Pricing Bank Credit Cards

Several banks have been increasing their late fees. Beginning this month the Chase subsidiary of J. P. Morgan Chase & Co. will raise its late fee to $35 from $29 for cardholders with balances of more than $1,200. In his article in the Wall Street Journal, Ron Lieber reports that Discover Financial Services (Morgan Stanley) and MBNA Corp. are planning similar increases. Estimates are that about three-fourths of late payers will be affected. Card issuers are also increasing their interest charges on balances carried over from month to month, and raising fees on late payments and for exceeding credit limits. Some banks are policing late payments more precisely. Discover charges a late fee if a customer's check does not arrive in the office by the due date, while MBNA allows a one-day delay.

Credit card issuers are also encouraging consumers to use their credit cards for big-ticket expenditures, such as tuition payments, taxes and charitable contributions. MasterCard is encouraging payments of bills for cable television. As Ron Lieber concludes in his article in the Wall Street Journal, "Now, credit card issuers want people to use the card in new places for bigger purchases. Wider use and higher balances mean more interest income for the card issuers. Lieber cites data from Card-Web.com showing that the average credit card debt rose to $8,367 this year, "more than 1993 level." Students seek frequent-flyer miles by paying their tuition with credit cards. However, some schools, including Williams College, have decided not accept credit cards for that purpose because of the fees payable to the card issuer.