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The Return of Annual Fees

Nancy Trejos

There’s some mixed news on the credit card front.

U.S. households are receiving far fewer credit card offers, which could be a good thing for those who could so easily fall into the debt trap. But for those receiving offers, the cards are increasingly coming with annual fees.

In the first quarter of this year, U.S, households received 372.4 million offers, a 67 percent drop from the same time period last year, according to Mail Monitor, the direct mail tracking service from market research firm Synovate. Twenty-seven percent of the cards carried an annual fee, up from 18 percent one year ago. And the mean annual fee is $74, Direct Mail found.

Credit card companies have been reeling from a record number of write-offs, which are debts that they have to give up on, making them leery of lending to riskier borrowers. Last month, President Obama signed a law that would ban many consumer-unfriendly industry practices, such as arbitrarily raising interest rates, starting in February. Card issuers have said the new law could force them to raise interest rates and charge annual fees on all future credit cards, regardless of how risky or not-so-risky a consumer is.

“As issuers continue to cut back offers and the mailbox becomes more superprime we are seeing a proportionately higher number of card offers with an annual fee,” said Andrew Davidson, Vice President of Competitive Tracking Services for Synovate’s Financial Services Group.

Now, more than ever, consumers have to be more vigilant when they get their credit card bills.

"Consumers must pay attention to the offers they receive to see if the card has an annual fee,” said Bill Hardekopf, chief executive of LowCards.com and co-author of The Credit Card Guidebook. “In addition, consumers need to look at the notices you receive in the mail or in your bill to see if your issuer has added, or even increased, an annual fee."

By Nancy Trejos  |  June 5, 2009; 12:00 PM ET
Categories:  Credit Cards , Nancy Trejos  
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Comments

Well let's hope that nobody accepts any of these offers. Not only will they not have any new customers to steal money from, they'll lose a fortune in postage.

Frankly, all of the credit card companies deserve to lose their shirts. They don't know how to run their own business - the lending business. Even a third grader knows you don't lend someone money without it being paid back. If someone has lost their job, that's one thing. But when the CC companies send out applications to college students who are already up to their eyeballs in debt, or to people right out of bankruptcy -- well, that's just a stupid business practice on their part, and they deserve to get taken.

Posted by: mssnatchquatch | June 5, 2009 3:29 PM | Report abuse

This is a remarkable move by credit card companies, but you can turn it to your advantage.
Personally, I've always valued the annual fee on my Amex and preferred it over interest, because I always know where I stand and I like its rewards program and its great customer service. If you pay your card off every month it's an indirect form of saving. I'll be flying to Europe round-trip for free twice this year.
The downside is that if it becomes difficult to find a card without an annual fee then many people will no longer have credit cards. I don't think this is necessarily a bad thing either and will provide a gap in the market (customers) for a card without an annual fee.

J.N.Urbanski
www.wakeuptofrugality.blogspot.com

Posted by: jnurbanski | June 10, 2009 11:27 AM | Report abuse

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