We knew the credit card reforms would cost the banks money. So it's no surprise that they are coming up with new - and old - ways to make up lost profits.
Annual fees used to be common practice. Now some companies are taking a blast from the past approach to offset the sharp drop in revenue from lost over-the-limit fees and other changes.
Just in time to usher in the second wave of reforms on Monday, Citigroup is notifying some of its customers that come April 1st, they will be charged a $60 annual fee.
Peter, a reader in Minneapolis, was recently dealt this unwelcome hand:
I recently received a notice that my Citi Platinum card would start charging a $60 annual fee in April. They said it would be refunded if I charged $2400 to the card in a year, but I don't think I use it that much and I'd really rather not have to use it more just to avoid the fee. Are all cards going to be doing this soon, or is there any that you know of that are not planning to add an annual fee. I would gladly drop them for a better card.
Unfortunately, it's impossible to know for sure whether other card issuers will follow suit. But if this plays out like the wave of credit limit cuts that took place in the midst of the credit crisis, or the preemptive interest rate increases that were implemented by many issuers prior to the first of the credit card reforms, my guess is that many other cards will jump on the bandwagon in short order.
Here's what Bill Hardekopf, CEO of Lowcards.com had to say:
The tough economy, the high default rates they have experienced, and the enactment of the CARD Act have combined to make it a very stressful period for the issuers.
Adding annual fees is one way to generate new revenue. Consumers need to watch for this on their accounts since only about 20 percent of the credit cards currently carry an annual fee.
Hardekopf suggests calling your credit card company and asking it to waive the fee. If the answer is NO!, you can shop for another card. But there's no guarantee that that card company won't slap you with a fee a month from now.
It makes you wonder. Are the new reforms worth it? And what could have been done to make sure that one bad practice isn't traded in for another?