Got Perfect Credit? You Could Be Charged For It!

[BobMango]

October 27, 2009

Bank Of America, Citigroup First To Try Out Idea, Which Will Undoubtedly Alienate Many Who Follow The Rules

Loraine Mullen-Kress carries a Bank of America credit card and religiously pays off her balance.

"Flawless credit," she boasted.

Yet now, her good credit habits could cost her. Earlier this month Bank of America started notifying customers like Mullen-Kress that they will be charged a new annual fee of $29 to $99.

"There is a big segment of their population that they will have never made money on, which is people who pay their bills on time every month," said Ben Woolsey, Director of Consumer Research at CreditCards.com.

Bank of America said in a statement: "At this point we're testing the fee on a very small number of accounts and haven't made any final decisions." Citigroup is also trying out an annual fee with some card holders, and analysts expect more banks to follow their lead.

The banks are starting to charge fees to reliable customers in response to a slew of new credit card industry regulations that will limit when banks can hike interest rates. Cardholders who get a new annual fee notice in the mail will be in a no-win situation.

"They can either pay that fee or they can close the account, and if they have had the account for a while and they close it, they are potentially going to hurt their credit card score," said Woolsey.

Analysts say right now the banks are trying to figure out what their customers will tolerate. Many say they'd cancel cards with a high new annual fee.

"I think it is really bad. They're encouraging you to be a bed creditor or not have good credit," one New Yorker told CBS 2 HD.

Said Mullen-Kress: "An annual fee would not be tolerated."

Credit card companies call the fees an experiment. Whether they stick depends on whether customers are willing to pay for something that's been free for so long.

If your credit card company does start charging you to carry its card, call and complain. If you have a good credit score and you've been a loyal customer, they may be willing to waive the fee to keep your business.

You may also see annual fees go up on cards that offer rewards like miles and hotel rooms. That's when you'll have to weigh whether the rewards are truly worth the higher fee.

Source:
wcbstv.com
http://wcbstv.com/consumer/credit.ca...2.1272124.html

[BigJohn]

Sounds like the credit card companies want people to use debit cards, preferrably Walmart debit cards.

[andy158]

I read about this in USA Today earlier this month. They are grasping at every straw to make money now and are going to drive their good customers away. Who comes up with these bird brain ideas? Pre-paid or debit cards are the way to go now.

[Snickers]

"There is a big segment of their population that they will have never made money on, which is people who pay their bills on time every month," said Ben Woolsey, Director of Consumer Research at CreditCards.com.

And a heck of a lot of those people are going to dump their cards rather than pay $99 a year.

[BobMango]

Funny, this is the thanks we taxpayers get for bailing these chuckleheads out!

[woeisme]

This makes perfect sense to me. They are a business. They are lending you $ for purchases, for your convenience. Why does it make sense that you shouldn't ever have to pay anything for that service? That the fees should ONLY be paid by the people who carry balances? Because everyone gets the benefit of the ease of using the credit card instead of cash, gets to "float" that money for the several weeks before the charge comes due, so even if they pay it off 100% when the bill comes in, there must still be some advantage to using the credit card or else why wouldn't you just pay cash? They get the added consumer protections, limit their liability for losses (lose $ and you are screwed, lose a credit card, only liable for $50 of fraudulent use, if no one uses it, haven't lost a thing!) etc. I guess I just don't "get" why banks should carry all of the costs and risks of extending credit to people they make no profit from, in fact are losses for them because of the paperwork involved. Used to be ALL credit cards had fees, you paid for the privileged of carrying one. It's only been in the past 20 years or so people feel that credit cards should only charge fees to those that carry over balances from month to month.

[DebtEnder]

Credit cards get paid from the use of the card via the merchants who take the card.

Now if you have a card and never use it then there's no point in keeping them as a customer. But CC always make money on people who use it, via transaction fees or interest charges via carrying a balance

[andy158]

+1 ^ They wouldn't be in buisness if they weren't making money. They are just becoming more greedy and sucking every last penny they can before the credit reform becomes effective! They are becoming their own worst enemy.

[HakunaMatata]

These clever little acts remind me of GMAC when they refused to loan to anyone with a credit score less than 700. Obviously, GMAC's "perfect credit" business tactic wasn't so perfect...GMAC ultimately reduced their credit score minimums and wants another bailout.

[shabam]

Good idea. It will just make us consumer not want to use the cards and essentially not end up here due to cc debt.

The banks a making me never want to use credit again. Thanks guys.

[TooMuchCredit]

It wasn't that long ago that all cards had annual fees. The interchange fees that were mentioned have been reduced from what they were. Unused cards and cards that are paid off every month cost the bank money to keep on file. Those high default interest rates and overlimit fees helped offset the cost. Well now that those will be limited come February, the choice card issuers are left with is to charge the annual fee or close the account.

[BobMango]

I'm all for businesses making money. And if people are willing to pay for the privilege of carrying a card then more power to them. The problem I have with credit card companies is two fold. First, they often change the rules when you are in no position to opt out. Secondly, they have way too much influence in Congress. Look at the changes to the bankruptcy code, written by the financial institutions' lobbyists.

So my plan from here on out is to not put myself back in a position where these guys have any control over me.

[shabam]

Numerous leaders clearly do not understand that it is necessary to regulate such industries. They allow a bank to make the rules then change them as they go along. Their response is a typical and expected, 'well you used the credit', which is simply not acceptable. If I signed up to an interest rate of 5.9%, paid over 3 or 5 years, I better get that. However, what is occurring now is that they can sign you up to those terms, then for no apparent reason switch you to 18.99%.

I will never apply for credit or deal with a large bank again. My future dealings will be limited to honest and ethical local banks or credit unions. The con of the century is that the small banks have been left to collapse, while these legalized Al Capone type large banks, have been bailed out.

[TooMuchCredit]

Numerous leaders clearly do not understand that it is necessary to regulate such industries. They allow a bank to make the rules then change them as they go along. Their response is a typical and expected, 'well you used the credit', which is simply not acceptable. If I signed up to an interest rate of 5.9%, paid over 3 or 5 years, I better get that. However, what is occurring now is that they can sign you up to those terms, then for no apparent reason switch you to 18.99%.

I will never apply for credit or deal with a large bank again. My future dealings will be limited to honest and ethical local banks or credit unions. The con of the century is that the small banks have been left to collapse, while these legalized Al Capone type large banks, have been bailed out.

The new rules that go into effect in February change that. Unless I believe you go 60 days past due or more, they cannot raise the rate on your existing balance, only on future purchases. To me that makes sense.

I believe you will also have to opt in or be able to opt out to have items approved over your limit, so instead of it being approved, putting you overlimit and then having them charge you a fee/raising your rate for doing so, you will just be declined in the store.

[iv65536]

If we can persuade Congress to impose a hard cap, in dollar terms, not percentages, on the amount of capital a bank can have on its balance sheet, we then can create a situation where we will be breaking up many of the big banks, and creating a financial system where no bank can become "too big to fail". Once the banks are all under the cap, then require them to pay dividends to shareholders sufficient to keep them under the cap. I believe it is much easier to properly supervise and regulate 20 banks with tangible common equity of $2 billion each than it is to do so with one bank with tangible common equity of $40 billion.