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October 21st, 2009

New Credit Card Fees Target Responsible Customers

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We called it! While some industry experts like Curtis Arnold of CardRatings.com said that they didn’t expect the recently-enacted credit card reform to impact good customers, we warned readers back in May that it was inevitable.

It’s simple: if you take away the credit card companies’ ability to raise rates, then they’ll simply develop new and “creative” fees and charges to nickel and dime their customers. Perhaps “nickel and dime” isn’t entirely fair since fees and charges are two of the main sources of income for credit card companies (emphasis added):

Starting next year, Bank of America will charge a small number of customers an annual fee, ranging from $29 to $99. The bank has characterized the fee as experimental. But card holders who have never carried a balance or paid late fees could be among those affected.

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.

What can you do about it? There are several approaches you can take. Since we knew this day would come, we prepared a list some four months ago of the actions you can take to “combat” these new fees:

Call: “When you receive notification of higher APRs, lowered limits or annual fees be prepared to call the credit card company and do what you can to try to get back what they have taken away from you.”

Be Careful When Canceling: “Do NOT cancel your major bank card just because they’ve added an annual fee.” Canceling your credit card can seriously damage your credit score. “If you’ve had the card for 5 or more years and cancel it, then your longevity is affected in your credit scoring. So be strategic in what you cancel and when.”

Be Creative: “With the reduction of reward perks and cash back savings, it may be time to look outside your own credit card for rewards on the items you purchase. For example, at the site Upromise.com you sign up free and get anywhere from 1% to 25% deposited into a 529 savings plan for items purchased.” Also, be sure to research (now and in the future) competing companies for the best rates, terms, rewards, and points.

Know Your Terms: It has always been essential to read and understand the terms and conditions of your contract. Kay reiterates that if you don’t understand any of the terms or conditions, call your credit card company and have them explain it to you.

For more, please read:

  • Card Companies Find More Ways to Dodge New Rules
  • Credit Card Reform: Who Is It Helping?
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    One Response to “New Credit Card Fees Target Responsible Customers”

    1. “Bad Credit” Credit Cards: How You Can Avoid High Fees | X Mortgage Loans Insider Says: October 26th, 2009 at 10:34 am

      [...] New Credit Card Fees Target Responsible Customers | HSH Financial … [...]

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    HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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    Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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