The cost of being late? The case of credit card penalty fees

Nadia Massoud, Anthony Saunders and Barry Scholnick

Journal of Financial Stability, 2011, vol. 7, issue 2, pages 49-59

Abstract: This paper is the first in the literature to examine the determinants of US credit card penalty fees. Many critics of credit card fees - including a number of US Senators - have argued that credit card penalty fees reflect banks' market share. Using a unique data set we find that fees are increasing in customer risk which supports the position of defenders of penalty fees, such as banks. However, our finding that fees are increasing in a bank's market share is consistent with the concerns expressed by politicians and regulators. We also find card penalty fees are direct substitutes for card interest rates.

Keywords: Credit; cards; Penalty; fees; Late; payment; fees; Interest; rate (search for similar items in EconPapers)
Date: 2011
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Persistent link: http://EconPapers.repec.org/RePEc:eee:finsta:v:7:y:2011:i:2:p:49-59

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