I don’t have any credit cards currently but it never ceases to amaze me what people will pay to have one. Congress recently passed a bill that limits the banks from raising interest rates on existing balances. In reaction to this limit, banks are now starting to charge annual fees.
According to an article in USA, Today,
Citigroup, meanwhile, has started charging annual fees to card holders who don’t put more than a specific amount on their cards, typically $2,400 a year. Other banks are charging inactivity fees if customers don’t use their credit cards during a specific period of time. You heard that right: You could be spanked for staying out of debt.
These fees are the credit card industry’s response to credit card legislation that will, among other things, restrict credit card issuers’ ability to raise interest rates on existing balances. Credit card issuers are looking for ways to raise income before the new rules take effect in February. During the first quarter, 27% of credit card offers included annual fees, up from 18% a year earlier, according to Synovate Mail Monitor, a credit card direct-mail tracking service.
Other companies are just increasing or adding an annual fee for all credit cards. USA Today, suggests that you make a decision on whether to keep your card or not by deciding how much you are going to use it and whether you can find a better deal elsewhere. They suggest finding a credit union as they generally have lower rates and charges for their members.
Has your interest rate or annual fee changed on your credit cards in anticipation of the new legislation?
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Yuck, I hate the thought of paying an annual fee. We pay it on our line of credit, but that is the only one. I will have to pay close attention to all those change of terms letters that come in the mail. Thanks for the heads up.
This definitely is a blow to those who like to have more than one credit card. Previously you could have many credit cards to take advantage of extra incentives some cards give at some retailers.
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Raj what the hell are you talking about? That makes no sense whatsoever.
The credit card companies forced themselves to charge this kind of fee. They simply were overly optimistic in their planning. They thought they could aggressively market and offer cash back credit cards and no annual fees. They basically painted themselves into a corner.
This annual fee would definitely force me to reconsider how many credit cards I’m holding and I’ll have to do some research on which ones will give me better rates.
@Jeremy: Great point considering the fact that women like to have credit cards from various retailers because they do offer extra incentives.
Great article! Thanks for the heads up!
The credit card companies will get it any way they can from us – the consumers. I really feel it is so unacceptable with the high interest rates. To resort to charging you an annaul fee because you don’t carry a debt. Hmm doesn’t make sense to me. There are so many credit card companies out there that are looking for business, if you just do some research and asking around at your local banks, you should be able to get a better deal without annual fees etc.