Monitoring grey charges can save cardholders and issuers billions of dollars
Boston, July 25, 2013 – Research from Aite Group released today shows that grey charges—deceptive credit and debit card charges that occur as a result of misleading sales and billing practices—cost U.S. cardholders US$14.3 billion in 2012. Although grey charges produce approximately US$214 million in interchange fees annually for card issuers, issuers incur more than a half a billion dollars in service-related costs each year when cardholders dispute the charges.
The research results included in The Economic Impact of Grey Charges on Debit and Credit Card Issuers is written in association with BillGuard, which provided Aite Group with non-personally identifiable information for 4,817 randomly selected users in 2012. Data include the number, type, and total amount of grey charges for each month and the card issuer associated with each grey charge.
Three in 1,000 debit and credit card charges are grey charges, and analysis shows that though the charges aren't technically fraudulent, it is in issuers' best interest—economically and ethically—to help cardholders monitor and avoid grey charges. Grey charges total more than US$14 billion per year among US cardholders (debit and credit), with US$215 being charged per person annually for the 35% incurring grey charges.
"On one hand, issuers generate interchange fees from grey charges. On the other hand, issuers incur service-related expenses when cardholders question and dispute charges. Ultimately, issuers lose interchange revenue when cardholders discover and discontinue grey charges. In addition, issuers risk causing cardholder dissatisfaction when charges aren't identified. This leads to customer attrition or a shift in card spending preferences," says Ron Shevlin, senior analyst in Retail Banking at Aite Group.
Aite Group's retail banking clients can download the report here.