2022 Credit Card Late Fees Cost Consumers Record $15 Billion

U.S. credit cardholders collectively spent $15 billion on late fees in 2022 - officially surpassing pre-pandemic levels again. This will likely change significantly from 2024, however, as the Biden Administration has capped most types of these payments at $8 in a larger effort to reduce so-called junk fees. The Consumer Financial Protection Bureau estimates that the average late fee stood at $32 in the U.S. previously, four times the new limit.

According to the watchdog, savings for consumers will amount to $10 billion annually. The new rule says that credit card issuers with more than 1 million accounts have to stick to the $8 limit. Data shows that especially the top 20 issuers had so far charged maximum late fees almost exclusively exceeding $36. Smaller banks had lower fees on average, according to the data, with 80 percent percent of them charging between $21 and $40. Credit unions charged even lower rates, with maximums not exceeding $25 for three quarters of these cooperatives.

Late fees constitute the biggest part of credit card fees in the country, with annual and other fees only making up $10 billion opposite a total of $15 billion in late fees paid by U.S. households and businesses in 2022. During the Covid-19 pandemic, U.S. debt making went down while savings went up, causing fewer late fees and less interest incurred through credit cards as Americans were staying home more and spending less. Some issuers also offered waivers for late fees during the pandemic which further reduced their incidence.

Late fees have so far made up around one tenth of all credit card interest and fees, which stood at $130 billion in 2022, and they were predominantly paid by those with lower credit scores, poorer Americans and those of color. Another CFPB report shows that despite only making up 12 percent of credit card accounts in 2019, those rated subprime incurred 42 percent of late fee volumes. While interest drove up subprime accounts' balances by 21 percent, late fees added 6 percent for regular subprime and 11 percent for deep subprime accounts. In places with local annual incomes of around $20,000 per adult, annual late fees stood around $30 per account. In areas with $80,000 or more in annual incomes, the average late fee per year was only half that. Likewise, in areas where more than 50 percent of residents identified as Black, average annual late fees exceeded $25 and topped $30 in areas that were 90 percent Black.