Credit Card Perks, Rewards, and Fee Structures in 2017: An Overview

The landscape of credit card offerings in 2017 presented a complex mix of evolving fee structures, competitive rewards programs, and specific consumer benefits. Data from industry surveys and user reports indicates that while certain fees were becoming less common, others remained nearly universal. Simultaneously, credit card issuers continued to leverage generous sign-up bonuses and rewards systems to attract and retain customers, particularly in the travel and cash back categories.

Fee Structures and Consumer Costs

Credit card fees remained a significant aspect of the consumer experience in 2017, though the environment was shifting. According to a survey of 100 widely held general-purpose cards, the average number of fees per card was approximately six. While some fees were declining, others were deeply entrenched in the industry.

Prevalence of Specific Fees

Foreign transaction fees, which typically add 3 percent to foreign charges, were continuing to fade away. The survey noted that the number of cards charging these fees dropped from 77 in 2015 to 56 in 2017. Conversely, late payment and cash advance fees remained nearly unavoidable, charged by 99 and 98 of the 100 surveyed cards, respectively. Balance transfer fees were also very common, mandated by 76 of the 89 cards that allowed such transfers.

Annual fees were less ubiquitous, with only 24 of the 100 cards charging them. The once-common over-limit fee was found on just four cards in the survey.

Cash Advance and Penalty Fees

Cash advance fees represented a substantial revenue stream for issuers, generating $26.6 billion in 2016, which comprised 27 percent of total fee income. The Pen Fed Promise Visa Card was the only card in the 2017 survey that never charged a cash advance fee. Two Navy Federal Credit Union cards—the cashRewards Visa and the Platinum card—did not charge cash advance fees for transactions performed at Navy Fed branch ATMs.

Penalty fees accounted for 12 percent of issuer fee income in 2016. Late fees were the most universal credit card fee, typically up to $37, as charged by 59 cards in the survey. Only three cards—Discover it Cash Back, Discover it Student Cash Back, and Discover it Student chrome—allowed a cardholder’s first late payment to slide fee-free. Returned payment fees were charged by 80 cards, with a typical cost of up to $37.

Avoidable Fees

The survey highlighted that many fees could be avoided through good payment behavior. Only 24 of the 100 cards charged an annual fee, and foreign transaction fees were increasingly rare. The Pen Fed Promise Visa was noted for charging only one fee, and that only if cardholders requested paper statements in addition to free online copies.

Rewards Programs and Consumer Benefits

Despite the presence of fees, credit card rewards programs remained a major draw for consumers. Issuers used these programs to secure business and incentivize spending.

Travel and Sign-Up Bonuses

Travel rewards cards offered benefits such as annual travel fee credits, airport lounge access, cell phone protection, and primary rental car insurance. Airline-branded cards provided modest perks like priority boarding and a few lounge passes annually.

Sign-up bonuses were a key incentive. One user reported applying for five new cards in the first half of 2017 to collect sign-up bonuses, subsequently returning to a preferred "Chase trifecta" of Chase Sapphire Reserve, Freedom Unlimited, and Freedom cards. This user noted that American Express revamped their Platinum card and offered lucrative sign-on bonuses during that period.

Specific Card Evaluations

Consumers evaluated cards based on specific benefits versus costs. For example, the U.S. Bank Altitude Card had a $400 annual fee but included a $325 travel credit and 50,000 sign-on points worth $750, along with Priority Pass and free Gogo Wi-Fi. However, some users felt it did not differentiate itself meaningfully from other premium offerings.

The American Express Blue Business Plus card was noted as a new offering with a $0 annual fee that earned 2x Membership Rewards points on all purchases, superior to the earning rate on the Amex Platinum card for general spending.

Strategic Card Management

Users reported strategies such as canceling cards after collecting sign-up bonuses if the annual fee was not justified by the perks. One user noted canceling an airline card after the first year because the only remaining benefit (zone 1 boarding) was not worth the $95 annual fee, planning to reapply in two years for a new sign-up bonus.

The Economics of Credit Card Rewards

The funding for these rewards programs comes from various revenue streams. While credit cards were marketed as a way to "save money" through cashback and airline miles, someone ultimately pays for these rewards.

Revenue Sources

Revenue is generated through: - Annual fees: Charged upfront to cover administration costs. - Late fees and interest: High interest rates (around 25% per year) and late fees generate significant income, though these can be avoided by paying in full. - Interchange fees: A significant method of revenue generation for credit card companies.

The number of credit card accounts in the U.S. increased from 386 million in 2010 to 455 million in 2017, indicating a growing market for these financial products.

Conclusion

In 2017, the credit card market was characterized by a dichotomy of fees and rewards. While consumers faced nearly universal fees for late payments and cash advances, they also had access to sophisticated rewards programs and sign-up bonuses. The trend of declining foreign transaction fees and the rarity of over-limit fees suggested a consumer-friendly shift in some areas. However, the industry's reliance on interchange fees, interest charges, and annual fees remained fundamental to sustaining the lucrative rewards programs that attracted cardholders.