Wednesday, October 21, 2009

Banks to Charge Fees for Paying Off Credit Card Every Month

Avoid doing business with these companies:

Starting next year, Bank of America will charge a small number of customers an annual fee, ranging from $29 to $99. The bank has characterized the fee as experimental. But card holders who have never carried a balance or paid late fees could be among those affected.

Citigroup, meanwhile, has started charging annual fees to card holders who don't put more than a specific amount on their cards, typically $2,400 a year. Other banks are charging inactivity fees if customers don't use their credit cards during a specific period of time. You heard that right: You could be spanked for staying out of debt.

These fees are the credit card industry's response to credit card legislation that will, among other things, restrict credit card issuers' ability to raise interest rates on existing balances. Credit card issuers are looking for ways to raise income before the new rules take effect in February. During the first quarter, 27% of credit card offers included annual fees, up from 18% a year earlier, according to Synovate Mail Monitor, a credit card direct-mail tracking service.

I have a Citi card that I rarely use, and now I could be charged a fee for not using it. However, if I close my account it could hurt my credit score.

In an effort to soften the blow to deadbeats, new regulation is shifting the costs to responsible borrowers. That's in addition, of course, to the many billions of dollars we've given to these banks to save them from their own mistakes.

Only the Federal government could take a system that is totally broken and make it worse.

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