The cost of being late? The case of credit card penalty fees
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.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Calem, Paul S. & Gordy, Michael B. & Mester, Loretta J., 2006.
"Switching costs and adverse selection in the market for credit cards: New evidence,"
Journal of Banking & Finance,
Elsevier, vol. 30(6), pages 1653-1685, June.
- Paul S. Calem & Michael B. Gordy & Loretta J. Mester, 2005. "Switching costs and adverse selection in the market for credit cards: new evidence," Working Papers 05-16, Federal Reserve Bank of Philadelphia.
- Sarangi, Sudipta & Verbrugge, Randal, 2000. "Late fees and price discrimination," Economics Letters, Elsevier, vol. 69(2), pages 153-158, November.
- Peterson, Richard L, 1977. "Factors Affecting the Growth of Bank Credit Card and Check Credit," Journal of Finance, American Finance Association, vol. 32(2), pages 553-64, May.
- Joanna Stavins, 2000. "Credit card borrowing, delinquency, and personal bankruptcy," New England Economic Review, Federal Reserve Bank of Boston, issue Jul, pages 15-30.
- Christopher R. Knittel & Victor Stango, 2003.
"Price Ceilings as Focal Points for Tacit Collusion: Evidence from Credit Cards,"
American Economic Review,
American Economic Association, vol. 93(5), pages 1703-1729, December.
- Christopher R. Knittel & Victor Stango, 2001. "Price ceilings as focal points for tacit collusion: evidence from credit cards," Working Paper Series WP-01-12, Federal Reserve Bank of Chicago.
- Mark Furletti, 2003. "Measuring credit card industry chargeoffs: a review of sources and methods," Payment Cards Center Discussion Paper 03-15, Federal Reserve Bank of Philadelphia.
- Mark Furletti, 2003. "Credit card pricing developments and their disclosure," Payment Cards Center Discussion Paper 03-02, Federal Reserve Bank of Philadelphia.
- David B. Gross & Nicholas S. Souleles, 2002.
"Do Liquidity Constraints And Interest Rates Matter For Consumer Behavior? Evidence From Credit Card Data,"
The Quarterly Journal of Economics,
MIT Press, vol. 117(1), pages 149-185, February.
- David B. Gross & Nicholas S. Souleles, 2001. "Do Liquidity Constraints and Interest Rates Matter for Consumer Behavior? Evidence from Credit Card Data," NBER Working Papers 8314, National Bureau of Economic Research, Inc.
- Timothy H. Hannan, 2005.
"Retail deposit fees and multimarket banking,"
Finance and Economics Discussion Series
2005-65, Board of Governors of the Federal Reserve System (U.S.).
- David B. Gross, 2002.
"An Empirical Analysis of Personal Bankruptcy and Delinquency,"
Review of Financial Studies,
Society for Financial Studies, vol. 15(1), pages 319-347, March.
- David B. Gross & Nicholas S. Souleles, 1999. "An Empirical Analysis of Personal Bankruptcy and Delinquency," Center for Financial Institutions Working Papers 98-28, Wharton School Center for Financial Institutions, University of Pennsylvania.
- David B. Gross & Nicholas S. Souleles, 2001. "An Empirical Analysis of Personal Bankruptcy and Delinquency," NBER Working Papers 8409, National Bureau of Economic Research, Inc.
- Gande, Amar & Puri, Manju & Saunders, Anthony, 1999. "Bank entry, competition, and the market for corporate securities underwriting," Journal of Financial Economics, Elsevier, vol. 54(2), pages 165-195, October.
- Scholnick, Barry & Massoud, Nadia & Saunders, Anthony & Carbo-Valverde, Santiago & Rodríguez-Fernández, Francisco, 2008.
"The economics of credit cards, debit cards and ATMs: A survey and some new evidence,"
Journal of Banking & Finance,
Elsevier, vol. 32(8), pages 1468-1483, August.
- Carbó Valverde Santiago & Massoud Nadia & Rodríguez-Fernández Francisco & Saunders Anthony & Scholnick Barry, 2007. "The Economics of Credit Cards, Debit Cards and ATMs: A Survey and Some New Evidence," Working Papers 201074, Fundacion BBVA / BBVA Foundation.
- Ian Domowitz & Robert L. Sartain, 1999. "Determinants of the Consumer Bankruptcy Decision," Journal of Finance, American Finance Association, vol. 54(1), pages 403-420, 02.
- Stango, Victor, 2002. "Pricing with Consumer Switching Costs: Evidence from the Credit Card Market," Journal of Industrial Economics, Wiley Blackwell, vol. 50(4), pages 475-92, December.
- Brito, Dagobert L & Hartley, Peter R, 1995. "Consumer Rationality and Credit Cards," Journal of Political Economy, University of Chicago Press, vol. 103(2), pages 400-433, April.
- Ausubel, Lawrence M, 1991. "The Failure of Competition in the Credit Card Market," American Economic Review, American Economic Association, vol. 81(1), pages 50-81, March.
- Victor Stango, 2000. "Competition And Pricing In The Credit Card Market," The Review of Economics and Statistics, MIT Press, vol. 82(3), pages 499-508, August.
- Mitchell Berlin & Loretta J. Mester, 1987.
"Credit card rates and consumer search,"
88-1, Federal Reserve Bank of Philadelphia.
When requesting a correction, please mention this item's handle: RePEc:eee:finsta:v:7:y:2011:i:2:p:49-59. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.