What Is Fee Income?

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Fee income is the revenue that is generated by a business operation by charging fees to customers. Typically, fee income has to do with the use of certain features or services provided to the customer, and may be assessed as a flat rate per month or on a per-use basis. Fees of this type are most often associated with the financial industry, particularly in regard to fees assessed by banks, credit unions and mortgage lenders.

The assessment of fee income allows businesses to generate revenue that covers the expenses of providing certain types of services to customers, while also making it possible to enjoy a little profit off each event. For example, many generate fee income by charging for such services as covering checks written on accounts that are overdrawn, processing funds transfers on behalf of a client, or even providing ancillary services such as issuing money orders or teller checks for clients. Most financial institutions will specify what types of services are provided to customers at no charge and which ones will require some sort of fee.

Along with banks and similar institutions, other types of companies may also assess additional charges as a means of generating fee income. Credit card providers are likely to charge these general account fees on high-risk accounts, and may even include an annual fee of some sort as part of the contract to keep the account open. Most card companies will also assess a late fee when a payment on an account balance is received and posted after the due date. In addition, other fees may be assessed, such as an additional fee for preparing and sending more than one copy of an account statement.

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There is some degree of controversy in regard to fee income. One school of thought holds that many of the fees should be included in a monthly charge to the account, allowing customers to use those services whenever they like. A different approach holds that while some services should be bundled into the basic suite of services provided to the customer, allowing the assessment of fees for services considered outside the scope of standard and usual account is acceptable. In many nations, there are laws in place that help to regulate the type and amount of fees that can be assessed by certain institutions, making it possible for companies to assess fees that are considered within reason and are competitive with what similar companies are charging. Consumers often look closely at the schedule of fees related to services offered by an institution before making a decision on whether to do business with that entity or move on to a competitor.

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