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How annual fee could ding your score

By Jeanine Skowronski · Bankrate.com
Friday, May 30, 2014
Posted: 9 am ET

A few years ago, I signed up for a credit card even though I don't travel enough to justify paying its $95 annual fee.

I knew that, of course, when I was filling out the application, but I was also planning at the time to take a cruise. The issuer was offering a lucrative sign-on bonus. It was also offering to waive the annual fee for the first year. My big plan was to get the card, charge the cruise to qualify for the sign-on bonus and close the account before the annual fee could be imposed.

Well, things didn't work out as planned. First, I never took the cruise. (So long sign-on bonus!) Second, the card came with a high credit limit, which made me reluctant to close the account. Since I never use the darn thing, it does wonders for my credit utilization ratio and, subsequently, bolsters my credit score.

© Ingvald Kaldhussater/Shutterstock.comUnfortunately, never using it led to me rarely checking my monthly statements. So, I almost missed it when the company applied the $95 annual fee to my April bill.

Given my pretty stellar payment history, the whole incident freaked me out. The issuer confirmed the annual fee would have been treated like any other balance, so had I missed the payment, my score could have plummeted 70 to 90 points. Fortunately, there are several lessons I've learned from this experience:

  • Check your monthly statements, even if the card is just collecting dust in your wallet. You should be in the habit of checking for fraudulent charges anyway.
  • Sign up for alerts, and make sure they're ones you'll actually see. After almost missing the fee, I switched from email to text message alerts regarding upcoming payments. Things can easily get lost in my inbox.
  • Call up your issuer to talk out your issues. When I told the company I wasn't using the card, it agreed to downgrade me to a similar card which carries no annual fee, but preserved the annual-fee card's high credit limit. It also reimbursed the $95 fee I had paid back in April.

Talking to your issuer is a good tactic to utilize if they decide to add a fee as well. Under the Credit Card Accountability, Responsibility and Disclosure, or CARD, Act, issuers must notify you about a fee change 45 days in advance. You have the option to close the card, but you might also want to ask if the fee could be waived and/or you can be downgraded to one of their free products.

There's no guarantee it will work, but it certainly doesn't hurt to ask!

Follow me on Twitter: @JeanineSko.

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