Consumers on Notice: Annual Fees Could Stage a Return

credit cardsThere was a time not long ago when annual card fees for those with above average credit, or those who kept a low or zero balance, were few or non-existent.  Not anymore.
Bank of America recently made an announcement that put credit card consumers and the rest of the industry on notice. It informed a small group of its credit card holders that they will be charged an annual “membership” fee starting in February 2010, according to  the Associated Press. Customers could reject the fee by the Dec. 16 deadline, but then the account would be closed, according to the  story.
The fees, which will range from $29 to $99, are targeted at those who rarely carry a balance or incur penalties.
The February 2010 start-date coincides with the implementation month of sweeping new credit card reform, Credit Card Accountability,  Responsibility and Disclosure (CARD) Act of 2009. The laws severely restricts how and when credit card issuers raise interest rates  or charge fees.
Citigroup, meanwhile, has started charging annual fees to card holders who don’t use their cards enough. They would need to spend  $2,400 a year to avoid fees.
American Express typically charges annual fees, but it has not announced hikes on those fees or any changes on its fee-less cards.
However, credit industry analysts agree that the actions by Bank of America and Citigroup are likely a sign of things to come for  the major banks, as they grapple with ways generate revenue lost as a result of the coming reform in early 2010. Cardholders who  carry low or infrequent balances or rarely pay penalty fees are the first ones to be targeted.
For consumers, it’s a bit of a double-edged sword, since paying off debt can hurt their credit scores.  Those targeted, likely pay off their balances to avoid mounting debt and fees, and often take special care in maintaining good-to-excellent credit scores.
Some credit card consumers across the industry have already seeing their zero-balance cards cancelled, despite excellent payment  histories. But they may not realize that such cancellations could hurt their credit rating by lowering their total available credit. A  high balances-to-available-credit ratio is a negative factor in credit scoring.
Moreover, if the credit card was a long-standing account, it can hurt a credit ranking as well. Length of credit history in another  important factor. 
 
Annual fees on credit cards have always been around, particularly for those with poor credit who are hit with substantial fees. Even  rewards cards affiliated with certain airlines or hotels can carry fees. But general-purpose cards, for the most part, have been  spared of fees as the credit card industry has grown fiercely competitive in recent years. That is until the long-winded financial crisis and credit crunch of 2008.

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