Thursday, Feb. 18
Posted: 2 p.m.
LowCards.com reported this morning that Citi is adding a $60 annual fee to some of its credit card accounts. The annual fee takes effect on April 1. Consumers can avoid the charge by spending $2,400 per year.
If this move sounds familiar, that's because Citi tested annual fees last year on a small percentage of accounts.
As LowCards CEO Bill Hardekopf pointed out in his report, "If you spend at least an average of $200 per month on your Citi card, this may not be a big deal. However, it is a problem for the cardholders who charge less than $2,400 per year, who keep the account open for emergencies or to boost their credit score."
Recent research shows Citi is not acting alone in putting annual fees on credit cards. About 35 percent of the offers mailed in the fourth quarter of 2009 featured an annual fee, the highest share in the last 10 years, as tracked by market research firm Synovate Mail Monitor.
Overall, more than a third of the offers sent in 2009 carried an annual fee, according to Mintel Comperemedia.
Bank of America is also testing annual fees on some accounts this year. Chase added a $10 monthly charge in January 2009, but later rescinded the fee due to customer outrage.
It's unclear how customers will react to a fee added to their existing account, but in a fall 2009 Bankrate survey, 90 percent of consumers said an annual fee would deter them from applying for a credit card.
Nessa Feddis, vice president and senior counsel for regulatory compliance at the American Bankers Association, told reporters yesterday in a conference call that issuers are experimenting with annual and inactivity fees, in addition to restrictions on rewards programs and incentives for people to pay on time.
"At the end of the day … we're in a transition period and it will be the consumers and the consumer response that will drive what cards look like in the future," Feddis said.
On Monday, the bulk of the provisions in the new credit card law take effect. The Credit Card Accountability, Responsibility and Disclosure Act of 2009 does not prohibit issuers from adding annual fees to accounts.
A call to Citi Public Affairs this morning was not returned.
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