Ask Kim
More Credit-Card Fees Coming
Be on the lookout for these changes when you get your statement.
By Kimberly Lankford, Contributing Editor, Kiplinger's Personal Finance
February 16, 2010
With the new credit-card regulations, will more card companies start charging annual fees?
Yes. Many card companies are already introducing annual fees to boost revenues in anticipation of the new credit-card laws.
The Credit CARD Act, most of which takes effect on February 22 (some of the law’s disclosure rules took effect in August), provides many valuable consumer protections. Card companies won’t be able to raise your rate on an existing balance unless your payment is at least 60 days late, introductory rates must last for at least six months, and card companies cannot impose an overlimit fee without your permission, among other changes. (See FAQs on the New Credit-Card Rules for details.)
However, card companies have been making some changes of their own, such as adding new fees and boosting existing fees, which aren’t limited by the new credit-card law. Nineteen percent of consumers surveyed in January by Credit.com said that their card companies had increased their fees over the past several months, and the trend is likely to continue. Here are some changes to watch out for when you get your statement and disclosure notices from your credit-card company (which will be easier to decipher, thanks to the new law):
New annual fees. Only about 20% of the credit cards in the U.S. currently charge an annual fee, according to LowCards.com, but the number is likely to increase in 2010. "Some card companies have started to test annual fees on a small percentage of cardholders or offer cards with annual fees that build customer loyalty," says Bill Hardekopf, chief executive of LowCards.com. Chase is using premium rewards to encourage customers to select or upgrade to cards with annual fees, he says. Its new Sapphire Preferred card charges an $85 annual fee and offers enhanced point-earning benefits (the $85 fee is waived for the first year).
Inactivity fees. Card companies are starting to slap on inactivity fees if you don’t use your card frequently. For example, Fifth Third Bancorp recently added a $19 inactivity fee on cards that aren’t used in a 12-month period, says Hardekopf.
Processing fees. Some retail cards are adding a $1 monthly processing fee if you request a paper credit-card statement every month.
Higher fees on balance transfers. Hardekopf has also seen a big increase in balance-transfer fees. A year ago, the standard balance-transfer fee was 3%. But some card companies have recently increased their fees to 4% or 5%. See Are Balance Transfers Still a Good Deal? for information about the impact of these fees on your decision to transfer a balance.
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Reader Comments (16)
Posted by: Dan at 02/17/2010 10:47:08 AM
So what is the deal with Citi, I am a card holder with the same account for about 15 years. I made a great mistake not opting out of their changes, and now my rate has gone from 14% - 29%, on one of the worst years of spending in my life ( most people can understand 2009 drama). Now to make the situation better, they state, that if I pay on time (I always have) then they will credit me 10% on the following months bill. I think this is a bunch of BS...I don't think being a loyal customer is helpful anymore....
Posted by: Rhonda at 02/17/2010 03:03:01 PM
I purchased a home 1-29-2010 is there any incentive when I file my 2009 taxes?
Posted by: Alicia at 02/17/2010 04:01:40 PM
Our two credit cards from Citibank have instituted an annual fee which is waived if we make a minimum of $200 purchases a month. We have been with Citibank for over 10 years. After all the money they have made off of us, I think this is a dirty trick. We are going to close accounts that are instituting theses charges.
Posted by: JD at 02/17/2010 06:03:23 PM
Blame the government, not Citi. The new laws make it tougher to get money from deadbeats, so they increase costs for the good people to compensate. You might as well yell at your local gas station for not still charging $1.30/gallon.
Posted by: JB at 02/17/2010 07:58:21 PM
I received the leter from Citi stating that I will have to pay at least $200 a month to erase the $30 annual fee they now want to charge customers. I never wanted a Citi Card but when First USA was bought over, I received the card so I could continue with the card. The fact that the credit card companies are pushing these policies through before February 22 is just ludicrous. When are we all going to stand up against all of the nonsense that is transpiring because of the financial problems in our country??
Posted by: Rhonda at 02/17/2010 08:06:48 PM
I bought a home 1-29-2010 am i able to take advantage of any stimulus help?
Posted by: Bob at 02/17/2010 08:17:16 PM
As for me, I have canceled three of my four credit cards. I now pay by check or cash more often for purchases. One local gas station now offers a 5 cent a gallon discount for cash. I will continue to look for ways to avoid using my remaining credit card whenever possible. Use this year to pay off your cards and learn to live without depending on them. I predict that a year from now credit card companies will be begging for our forgiveness and trying to entice us again. But for now, they can kiss my back pocket goodbye.
Posted by: Valerie Plotkin at 02/17/2010 09:59:20 PM
They are all thieves...but you won't print this...amazing how that wonderful Democratic administration that journalists loved has given us "change"...Change, indeed...for the absolute worse case scenario possible...a joke...
Posted by: Kim Lankford at 02/18/2010 09:23:43 AM
Hi everybody, this is Kim Lankford. Thanks for sending your comments about your credit-card experiences and your strategies for dealing with the changes. I also wanted to answer Rhonda, who asked about the stimulus's help for home buyers. Since you bought a house on January 29, 2010, it's likely that you do qualify for a tax break -- either the $8,000 tax credit for first-time home buyers (to qualify, you must not have owned a home for the past three years) or the $6,500 credit for people who have continuously owned and lived in a home for at least five of the eight years leading up to the purchase of a new home. And if you close on the home in 2010, you can claim the credit on either your 2009 or your 2010 return. For more information about the rules, see Kevin McCormally's FAQs on the New Home Buyer Tax Credits at www.kiplinger.com/columns/taxquestions/archives/faqs-on-the-home-buyer-tax-credits.html.
Posted by: Johnny at 02/22/2010 10:39:55 PM
I will guarantee everyone that when the credit card companies institute annual fees they will lose more than they gain, and the ramifications will extend into other areas too, such as internet purchases, as well as in-store buying. More and more people will go back to cash---especially with economy in the tank as it is. The days of robbing Peter to pay Paul are over.
Posted by: Racol at 02/23/2010 08:16:22 PM
Going back to the credit card companies. I also have Citibank ( AT&T card) that raised my rates after my being a loyal customer over 15 years. Never late or always paying well over the min. payment due. My rate was raised to 23%. and my min. payment rocketed over double. I think the American Public should rally against all of them. The heavy burden of their mismanagement and executive million dollar bonus payout is on our backs. Oh yes, If I charge 1500. a month on my card they will lower my rate a point each month. I did not receive a opt out letter advising me about the rate increase....Who are they kidding. There is no more middle class....Poor or Rich....
Posted by: Mike at 03/01/2010 08:47:53 AM
Fifth Third Bank raised my rate from my promotional rate of 3.9% to 18% on February 21 citing that I went over my limit for the first time ever, in addition to charging an overlimit fee. The rate contractually was supposed to last until October. The reason I went over the limit was because the interest rate increased....Does anyone know if there is a federal agency we can complian to about these tactics? Looks like Obama's plan, although had good intentions, backfired on the middle class.
Posted by: Eddie at 03/04/2010 09:49:34 PM
Blaming President Obama for the charges credit card companies are raising is like blaming Mothers Against Drunk Drivers for the people drunk drivers kill. The credit card companies were bailed out and now want to keep paying million dollar bonuses. They dont want to have to live within their means like the rest of us have to. Yes, we need legislation that limits the amount of interest they can charge. It is all about screwing the American consumer by Big Business so they can buy power in Washington.. And now Supreme Court, right ring judges-- legislating that corporations can now spend as much as they want on a candidate. American workers are being held hostage and are being taken over by corporate America-- who'd rather see us starve so they can live the rich life. How did the FEW become the ruler of the MANY? And people still wanna think that a union is the bad guy in all this. Well, see what happens when you get rid of unions and you let de-regulation happen? Corporate greed and a Republican Party for sale to the highest bidder. And now the Democrats are starting to act like Republicans. We were lucky to get any credit card legislation. First they took away the unions, then they took away regulations, then they took away the middle class. And then the American Dream went down the tubes because the middle class gave corporate America everything it wanted---too stupid to know corporate America wanted to destroy the Middle Class and take everything the worker owned until the American worker became as poor as these third world countries where Corporate America is shipping all the jobs to.
Posted by: Dee at 03/08/2010 10:50:12 AM
What year did the credit card companies start charging annual fees? I'm having a disagreement with another person because I remember it starting during the Carter Administration of thd 70's.
Posted by: Mariana at 03/10/2010 09:12:49 PM
If I convert simple IRA to ROTH IRA now in March, when do I pay taxes on it, now or at the end of the year?
Posted by: Racol at 03/22/2010 08:42:19 AM
In answer to Mike's posting of 3/1/ The agency you can complain to about a credit card dispute is" Office of the Comptroller of Currency," They are under the Dept. of the Treasury. The Federal Reserve Board at www.federalreserveconsumerhelp.gov will investigate complaints about state member banks. Good luck!