Will Credit Cards Charge Annual Fees?
Earlier this month, Bank of America announced that they would be charging annual fees on a limited number of their credit cards. According to Market Watch (see http://www.marketwatch.com/story/credit-cards-gouge-consumers-ahead-of-new-law-2009-11-06?link=kiosk), Bank of America will begin charging annual fees in February, the month the final elements of the new credit card laws go into effect. While Bank of America is the first company to announce plans to charge annual fees, it is likely other companies will follow suit.
The degree to which credit card companies pursue annual fees will depend on a number of factors. If Bank of America’s annual fees cause an uproar from credit card customers, some companies may hold off on passing annual fees. However, consumers have been in an uproar over increased interest rates all year long, and that didn’t stop Citibank from raising interest rates to 29.99% on many customers a mere three weeks ago.
Rewards credit cards that do not carry annual fees will likely be the first type of credit cards to see fees added. Many consumers will be willing to pay these fees in exchange for cashback, airline miles, or points that can be redeemed for various merchandise, as rewards programs are quite popular among savvy credit card users. Already, most airline specific credit cards carry annual fees of $50 or more, and many American Express cards carry annual fees that can be as high as $400. However, the majority of credit card users gain little from rewards programs and would likely opt out of any annual fee if given the choice.
Unfortunately, the new credit card laws do not address annual fees, and consumers will not have the option to opt out of annual fees without closing their accounts. This, in turn, can hurt credit scores which, to make matters worse, can make it more difficult to obtain a new credit card.
No annual fee credit cards will likely remain available to consumers who use bare-bones, no frills credit cards that do not carry rewards programs. However, consumers who don’t have the best credit may be charged annual fees to use those cards as well. The final implementation of new credit card laws, as well as the condition of the economy, will play huge roles in the future of annual fees. But based on the actions of credit card companies this year, it is likely that no annual fee credit cards will become the exception, rather than the rule.