Annual Fees For Credit Cards Have Returned

When the Credit Card Accountability, Responsibility and Disclosure Act (Credit CARD Act) was passed earlier this year, consumer advocates rejoiced at the prospect of finally seeing some fair play in the credit card arena. Industry analysts were a bit more skeptical however and stated that credit card companies would instead find new ways to extract profits from credit card holders to compensate for lost profits caused by the Credit CARD Act.

It seems that the skeptics are being proven right. In the past few months, credit card companies have been busy raising interest rates, limiting available credit and adding new fees to credit card. One particular fee being added to credit card holders is the annual fee.

The annual fee is actually an old fee. During the time when credit cards were still new in the market, annual fees were commonly charged to credit card holders. However, in the past few years, when credit cards experienced massive growth and market competition became quite fierce, credit card companies began phasing out annual fees.

Now, annual fees are making a come back. Bank of America recently announced that it will be test marketing to a selected number of credit card holders a new “membership” fee. Most probably, this “membership” fee is what was once recognized as annual fees. Bank of America will probably be measuring the reaction of the select few who get the “membership” fee and, if the protests are not that loud, they will probably be introducing it to the majority of their card holders.

Bank of America’s announcements is expected to be only the first of many. Other major banks in the credit card business are likely to follow Bank of America’s footsteps. This means that, for the majority of credit card holders, annual fees may be here to stay.

Actually, annual fees are already being charged on a number of credit card holders. For instance, credit card issuers focused on the subprime market generally charge annual fees to their customers. Incidentally, annual fees for subprime credit card holders are usually quite high which makes subprime credit cards generally a bad deal for consumers.

Businesses such as hotels and airlines which offer credit cards in partnership with some of the major credit card companies may also charge annual fees, something which many card applicants of theirs miss.

For regular credit card holders, if they get a notice informing them that their credit card company is going to be charging them annual fees, they can try calling up their credit card company to opt out of it. Chances are fair that the credit card company may agree. If not, then another viable solution is to move to another credit card company, one that does not charge annual fees.