Bank of America will be charging a new $59 annual fee to about 5 percent of its credit card accounts in May, according to an article by the Associated Press.
Whether or not a Bank of America credit card customer will be charged the new annual fee depends on a customer's credit risk profile, AP reports. According to the article, customers that carry balances close to their credit limits, have lower-than-average FICO scores or pay late on a regular basis may be charged the new annual fee.
Bank of America card customers assessed the new annual fee are also unlikely to have any other relationships or accounts, such as a mortgage or checking account, with Bank of America, according to AP.
According to the CARD Act, credit card issuers must provide notice of certain changes to your credit card account 45 days before they take effect. These changes include adding an annual fee to a credit card account.
So it's important to monitor your credit card accounts carefully and be on the lookout for new fees.
Has a credit card issuer informed you that a hefty annual fee is being added to your credit card account? Would you rather close the account altogether than pay the annual fee?
Before you close a credit card account, be sure to consider the impact on your credit score.
Your credit score considers how much of your revolving credit lines that you use every month. This is called a credit utilization ratio. The higher your credit utilization ratio climbs, the lower your credit score dips.
Closing a credit card account, especially one with a high credit line, could push up your credit utilization ratio, nudging down your credit score.
Utilization counts for a good portion of a factor worth 30 percent of a consumer's FICO score, the most widely used credit scoring model. The FICO score doesn't factor the balance and limit of a closed account into utilization once the cardholder has paid off the account.
So if you have high balances on other credit cards when you close a card account, your utilization could climb and ding your credit score. But as soon as you start to pay down those other balances, your credit score should improve.
If you decide to close a credit card due to a hefty annual fee, the best way to protect your credit score is to pay down balances on your other credit cards. If you pay your credit cards in full each month, you can protect your credit score by charging less on your other credit cards.
Ready to close a credit card account? Be sure to follow these steps.
Come back to our home page Monday, Feb. 28, for our Managing Debt special feature. Find out how to live a debt-free life.