This article was updated on June 23, 2018.

Nobody had a credit card when I was a kid. No one had credit card debt.
But these big companies and banks wanted to know how to get more money
out of people -- get them charging things.
-- Michael Moore 

The year 2016 was a bad year in terms of terrorist incidents, deaths of beloved celebrities, and summer movies -- but it wasn't so bad for credit card companies. According to industry research organization R.K. Hammer, credit card fee and interest income topped $163 billion in 2016. 

Sad man looking at his wallet, while dollar banknotes fly away.

Image source: Getty Images.

Credit card companies make money off cardholders in a wide range of ways -- and their income has been experiencing solid growth for years. Fee income rose 6% year over year in 2016 and is expected to jump 6.5% in 2017.

Detailed dollars

Here's a breakdown of how cards generated that $163 billion in 2016 through fees and interest:

Interest Income

$63.4 billion

Interchange income

$42.4 billion

Cash advance fees

$26.6 billion

Annual fees

$12.5 billion

Penalty fees

$12 billion

Enhancement income

$6.3 billion

Source: R.K. Hammer data, via Bloomberg. 

Some of those categories are clear, while others may not be:

  • Interest income is what the card companies charge you if you keep a revolving balance.
  • Interchange income is what they receive in fees from merchants when you purchase something with plastic. The fees vary, but are roughly, on average, about 2% of the value of the transaction.
  • Cash-advance fees are levied on top of the interest that you're charged when you borrow money against your credit limit, and they're often in the neighborhood of 5% or $10 -- whichever is greater.
  • Annual fees are familiar to us. Annual fee income rose 8.7% between 2015 and 2016, as fancy rewards cards hiked their annual fees. (The Chase Sapphire Reserve® card, for example, sports an annual fee of $450, while American Express's Platinum Card charges $550.
  • Penalty fees are charged when you're late making a payment. Exceeding your credit limit, or having a bounced payment, can trigger another fee. These fees can be as much as $37.
  • Enhancement income is made up of extra services that can come with your card, or are available through it, such as insurance products.
The word "fees" written on a blackboard, with the top of a man's head in front of it.

Image source: Getty Images.

Fees are a booming business

The fees alone in the table above total about $100 billion. Check out the table below to see how they've risen in recent years:


$100 billion


$94.3 billion


$90.3 billion


$79.9 billion


$82.5 billion


$81.2 billion


$78.4 billion


$78.9 billion

Source: Robert Hammer, R.K. Hammer. 

Keep more of your money -- pay less in fees

There are lots of ways to pay less in fees and keep more of your dollars in your own pocket instead of in the pockets of credit card companies. For starters, know that the majority of cards out there charge no annual fee, making that fee easy to avoid. (Note, though, that some cards offer great perks, rewards, and/or cash back that can more than make up for even hefty annual fees. You just need to do the math for yourself to see what offers the most benefit.)

You can keep your interest costs low by favoring cards with low interest rates and ones that don't impose a "penalty APR (annual percentage rate)" of up to nearly 30% when you pay a bill late. Here are just a few of many cards that don't sport penalty APRs: 

Three credit cards, fanned out.

Image source :Getty Images.

  • Chase Slate®: This card offers a 0% initial APR for the first 15 months on balance transfers and purchases. Better still, there's no balance transfer fee on transfers made within the first 60 days. Chase Slate® also offers Blueprint financial plans to its cardholders to help them with debt-reduction strategies, and it makes your FICO score available, too. Once the 0% teaser rate expires, the APR it charges isn't among the lowest you'll find, so aim to get a lot of debt paid off in those first 15 months. There's no annual fee and no penalty APR, either. (Read our full review of Chase Slate® to learn more.)
  • Citi Simplicity Card -- No Late Fees Ever: This card features no annual fee, along with "no late fees ever" and "no penalty rate ever." For balance transfers, it charges a fee of 3% of the value of your transfer, or $5 -- whichever is greater. That's not great if you're looking to transfer a balance, but note that its initial APR is 0% for 21 months for both purchases and balance transfers. That's one of the longest periods available with a 0% APR and it can be quite helpful. (Read our full review of Citi Simplicity Card to learn more.)
  • Discover it® Cash Back: This card offers 5% cash back on up to $1,500 spent over three months in categories that you activate (such as restaurants, gas stations, home improvement stores, or It charges no annual fee or foreign transaction fee, and imposes no penalty APR. (Read our full review of Discover it® Cash Back to learn more.)

Paying bills on time and not exceeding your credit limit will save you from being charged penalty fees, and avoiding cash advances will save you even more. These kinds of actions can also beef up your credit score -- which can yield all kinds of financial benefits, such as low rates for car and home loans. A strong credit score can also get you approved for a top-notch credit card offering great benefits.

Selena Maranjian owns shares of American Express and JPMorgan Chase. The Motley Fool recommends American Express. The Motley Fool has a disclosure policy. The Motley Fool receives compensation from some advertisers who provide products and services that may be covered by our editorial team. It’s one way we make money. But know that our editorial integrity and transparency matters most and our ratings aren’t influenced by compensation. The statements above are The Motley Fool's alone and have not been provided or endorsed by bank advertisers. Review The Motley Fool’s ratings methodology to uncover how we pick the best credit cards.