During the last two decades the majority of credit card users have never given a thought to annual credit card fees, as the card issuers were happily making their profits through less transparent fees and interest rates. However experimentation is underway to gauge if customers will tolerate new annual fees being attached to both new credit cards and existing cards. You may wonder why annual fees are being reintroduced when they have been out of vogue for so long.
The Credit Card Accountability, Responsibility and Disclosure Act came into effect in February 2010, curtailing the huge profits which credit card issuers were making on credit card fees. Some issuers were so usurious in their fees that the customer could end up being charged almost as much as their credit limit in fees just to use a card, patently sharp practice which the Act put an end to.
Annual fees were previously levied on cards which carried certain member benefits which the customer deemed worth paying for, as with American Express which charged no interest. This is an example of a privilege card and not considered a rip off as other annual charges are.
More usually those who fell foul to compulsory annual charges were the users who needed secured credit cards and sub prime credit cards. Secured credit cards carry annual fees and are used by those with bad credit history to try to repair their credit score and hopefully move back into the world of unsecured credit and those with no credit history at all who need to establish one. The annual fees levied are a necessary evil of acquiring such a card.
Sub prime credit cards are those which target people with bad credit, and always carry annual charge, as prey on the fact that the only way some people can obtain a credit card is to pay through the nose. The annual charges are known in advance though unlike some of the new annual charges which are being introduced to those users with existing credit cards which did not previously carry a charge.
The reintroduction of annual credit card fees is on the rise as issuers need to boost up these fees to bolster profits. The new fees are being aimed at existing customers of good standing and added to new offers of credit. The Bank of America, Chase bank and Citibank are all currently experimenting to see if annual fees will go down quietly with their customers or reduce their customer base. Balance transfer fees are being increased and inactivity fees being imposed.
Credit card customers have the choice of paying these new fees or walking away, but the latter will reduce their credit score, which the banks are counting on to keep customers held hostage to their new practices.
It is likely to be a growing trend for annual credit card fees to be introduced on cards which previously did not charge, and for fees with reward cards to cancel out the benefit of any rewards. If you change your card provider now in protest there is no guarantee that your new card issuer will not introduce an annual fee at some point in the future.
The best way to avoid fees is to pay your monthly balance off in full each month and use the card regularly, so if a fee is suddenly levied you will have more bargaining power when it comes to requesting that the fee is waived.