Rate Alert! Rate Alerts Glossary Glossary Help Help
News and Advice Compare Rates Calculators
- advertisement -
Credit card blog Archives
Ellen Cannon
See the latest Plastic Rap blog items below, or search by topic (below right).
Search by topic:

A fee for not using a card?

Tuesday, Feb. 27
Posted 11:30 a.m. Eastern

A fee for not using a card?

Lloyds TSB, a large bank in the United Kingdom, announced on Friday that it would begin charging cardholders who don't use their cards much, or at all, 35 pounds per year for "low usage." The bank sent letters to 50,000 customers announcing the change, and the news was rocketed around the country by the British media.

My first reaction to that news was, if this bank does it, American credit card issuers will, too.

My second reaction was, people who don't use their cards much will just cancel their cards. But won't that negatively affect their credit scores? We've always advocated paying off credit cards and putting them in a drawer rather than canceling them, because canceling cards does pull down one's credit score. That's because it removes that amount from your total available credit and might upset your ratio of available credit to used credit, a key factor in determining one's credit score.

A closed account, however, remains on your credit history. Before canceling a card, you should pull your credit reports and get your score so that you can consider the impact one less card will have.

At the Senate Banking Committee hearings last month, Michael D. Donovan, a partner in the law firm Donovan Searles and an advocate for consumers, suggested that credit card issuers charge an annual fee to those who don't use their cards much or who pay off their balances. This was to offset losses the companies would have if they did away with certain fees for those who carry large balances.

As one who pays her balance every month -- a "deadbeat," as the industry calls us -- I wouldn't want to pay an annual fee because I handle credit responsibly. If that were to happen, I imagine everyone who pays off the balance monthly would immediately start using debit cards instead of credit cards.

Would you pay an annual fee for the use of a credit card, even if you paid off your balance every month? Let us know what you think.


-- Posted: Feb. 27, 2007

Create a news alert for "credit card"
Credit card basics
Compare the best credit card rates
What will it take to pay off my credit card?
Fame & Fortune: Monica Seles
10-year Treasury-buyer beware
9 cash-saving strategies that pay big bucks

Credit Cards
Compare weekly rates
Type Fixed Variable
Standard 13.23% 14.96%
Platinum 12.70% 16.04%
All 13.02% 15.75%
- advertisement -
- advertisement -
- advertisement -

About Bankrate | Privacy Policy/Your California Privacy Rights | Online Media Kit | Partnerships | Investor Relations | Press Room | Contact Us | Sitemap
NYSE: RATE | RSS Feeds |

* Mortgage rate may include points. See rate tables for details. Click here.
* To see the definition of overnight averages click here.

Bankrate.com ®, Copyright © 2015 Bankrate, Inc., All Rights Reserved, Terms of Use.