Photo (cc) by barsen
Editor’s Note: This post is from partner site LowCards.com.
One week before the CARD Act goes into effect, Citi has added an annual fee to more accounts on many of its popular credit cards.
Many Citi cardholders are receiving letters about a $60 annual fee that is being added to their account effective April 1, 2010. If consumers make $2,400 in purchases during the year, then the annual fee will be credited back to their account.
It appears that Citi’s test of adding an annual fee to a small percentage of their customers in August of 2009 proved successful for the issuer. At that time, Citi began charging some cardholders an annual fee of $30 to $90 unless they spent at least $2,400 per year. Now a far greater number of customers are receiving this notice.
“The reason we are making this change is to maintain the quality of our service amid the rising cost of doing business,” said Ken Stork of Citibank in a letter to the cardholders receiving this notice.
“This is a very concerning sign for credit card consumers and it is further evidence of how issuers will react in 2010. Issuers are having to find creative ways to generate revenue. The tough economy, the high default rates they have experienced, and the enactment of the CARD Act have combined to make it a very stressful period for the issuers,” says Bill Hardekopf, CEO of LowCards.com and author of The Credit Card Guidebook. “Adding annual fees is one way to generate new revenue. Consumers need to watch for this on their accounts since only about 20% of the credit cards currently carry an annual fee.
“If you spend at least an average of $200 per month on your Citi card, this may not be a big deal. However, it is a problem for the cardholders who charge less than $2,400 per year, who keep the account open for emergencies or to boost their credit score. Other credit card issuers may follow Citi and add a similar fee.
“If the annual fee will be added to your account, contact the issuer to ask them to waive it. This may not work, but it doesn’t hurt to ask. You can opt out of the card and close the account. If you have a good history with this card and it is building your credit score, shift some of your spending to this card to reach the $2,400 limit and pay it off each month.”