Susan in New Jersey was reviewing her credit card bill last month and noticed that an annual fee had been applied to her account. She contacted the card issuer to see if the fee could be waived. The card issuer would not agree to that request and told her she would have to close the account if she did not want to pay the annual fee.
She is concerned about the potential impact on her credit score and feels that this is simply “not fair.”
First off—I applaud Susan for reviewing the details of her monthly card billing statement. Many consumers assume the charges have been applied correctly and don’t take the time for this review. Not a good practice in my opinion. Plus, reviewing the details helps prevent potential fraudulent use of your card.
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To be honest, I can’t really comment on whether the lender is acting fairly or not, but I would assume the terms of your card agreement with this issuer allow them to apply an annual fee. Oftentimes, a credit card has an annual fee that the card issuer may opt to waive in the first year as a means of getting you to apply (such is the case with airline reward cards). Once they have you for that first year, they hope you will like the card enough to pay the annual fee once you hit the end of the first year.
The closing down of the card could negatively impact your credit score as it reduces the amount of available revolving credit you have, which could make you appear more heavily utilized with the existing revolving balances you carry. The exact impact will depend on the credit line/balance associated with the closed account, your other revolving credit lines/balances and your other credit behaviors.
One idea that you or others in a similar situation may try is to see if the card issuer would be willing to switch your card from one that has an annual fee to a different card that does not. Hopefully they can do this and keep the account number the same (not have to issue a new card). Be sure to fully understand the terms associated with the new card as they may be different compared to the features associated with the card you had.
Card issuer revenue is down thanks to consumers having reduced their use of credit cards and regulatory changes associated with the recently enacted CARD Act. As such, it is a good bet that card issuers are looking for ways to make up for this lost revenue and charging an annual fee is one way they can generate new incremental revenue.
So—review those billing statements carefully!
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Tom Quinn Tom is Vice President of Scores at FICO (Fair Isaac), and has more than 25 years of experience in the credit industry with previous positions at FICO, Nomis Solutions, MDS (now known as Experian) and Citibank.
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That is definitely a great tip, even though we can assume that everything goes smoothly with our credit bill at the same time everyone is human and from time to time mistakes can be made. I agree and it surely is a must for everyone to check their monthly bill just in case.
I was wondering if having a secured credit card will be a lot safer or how will this benefit in any way?
Just curious as I personally have a passion for writing about this subject. =-D thanks!