Friday, May 29
Posted 9 a.m.
Bankrate reporter Leslie McFadden contributed this entry.
While some experts speculate that the annual fee could return in response to the passage of credit card legislation, market research firm Synovate reports that annual fees are already cropping up on credit card offers.
The number of solicitations for cards with annual fees increased to 27 percent during the first quarter of 2009, up 9 percent from the first quarter of 2008, according to Mail Monitor, the direct mail tracking service from Synovate.
"With all the legislation that's coming up and going to be in place recently, the industry is discussing at great length what it will look like in a post-legislative environment," says Andrew Davidson, vice president of competitive tracking services for Synovate's Financial Services Group. "What we're actually finding is that due to what's happening, we're already moving to some extent towards a fee-based model."
At the moment, he says the fee-based cards are targeting prime borrowers -- folks with high credit scores. The offers indicate a return to successful card products, such as co-branded airline cards that carry an annual fee. The much smaller component of subprime issuers still soliciting consumers are also offering fee-based cards.
The increase in offers with annual fees comes as Americans receive fewer offers overall. Solicitations are down 67 percent from last year, with 372.4 million offers stuffing mailboxes in the early months of 2009, according to Mail Monitor. The majority of the mail targets households with prime credit.
Davidson says that if more issuers move toward a fee-based model, the number of cards consumers carry will decrease, and issuers will compete for that top-of-wallet favorite.
"People aren't going to be willing to carry, necessarily, multiple cards with an annual fee -- they don't do it now according to our data," he says. Borrowers might end up with just one or two cards, he says.
His company's research showed that about 72 percent of households that had at least one fee-based card possessed only one such card, while on average they carried 2.8 cards overall. Davidson says that the card that did have an annual fee tended to get more use, possibly to get more out of the benefits that enticed the borrower in the first place.
Readers, how about you? If issuers begin charging annual fees, how many cards would you carry? Which ones would you dump first and why? E-mail Plastic_Rap@Bankrate.com.