Bank of America Corp (BAC), Citigroup Inc (C): How the Fee Kings Make Their Riches

By the numbers, card fees alone are significant contributors to banks’ bottom lines. In fiscal 2012, Bank of America Corp (NYSE:BAC) earned over $6 billion in “card income,” which equates to approximately 7% of net revenue for the year! The story at JPMorgan Chase & Co (NYSE:JPM) was similar: $5.7 billion, or almost 6% of net revenue. This is all income derived solely from fees and charges on credit cards or bank cards and not from interest earned.

Takeaway for investors
When it comes to evaluating a bank as a potential investment, it would be prudent to familiarize yourself with its fee structure and determine if it has a history of being able to generate steady income from it. Keep an eye on new legislation in regulating fee disclosure and generation.

Recent changes in interchange fees, or “swipe fees,” is a subject that ought to bear further investigation. A federal cap on the amount banks can charge merchants for each use of a debit card may have banks instituting new fees on checking accounts to make up the difference. Watch for how the major banks respond to these changes and the effects they may have on the bottom line going forward.

The article How the Fee Kings Make Their Riches originally appeared on Fool.com and is written by Raymond Boisvert.

Raymond Boisvert is a summer intern and has no position in any stocks mentioned. The Motley Fool recommends Bank of America and Wells Fargo. The Motley Fool owns shares of Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo.

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