Do you have a credit card and pay it off every month? Have you looked at your credit rating and found it to be perfect? That's great, but you might soon be penalized for it.
The reason for the new annual fee which, according to reports, is already being experimented on by Bank of America ($29 to $99), is that people who pay off their cards every month don't make enough money for banks. Simply stated, banks don't make enough money from the fees they charge retailers; they count on those really high interest rates to make a big profit.
This sort of moved has been feared for some time, now that regulations around the credit card industry are being tightened. When those new regulations were proposed, it was feared that not only would banks close down cards that generate cash rebates or miles, they would institute this sort of charge, which was popular in the past.
Bank of America said in a statement: "At this point we're testing the fee on a very small number of accounts and haven't made any final decisions." It's been reported that Citigroup is also trying out an annual fee with some card holders.
Interestingly, because of the way credit ratings are generated, if you close a credit card that you've have for some time, you might actually hurt your credit rating. You would think that less revolving credit would help your credit rating because there is less chance you can charge up a card, but that's not the way it works.
Banks indicate that for now these fees are an experiment. You can expect more banks to experiment like this, though. The question is, will consumers stand for it, or bolt? One thing to remember: if you've been a good, loyal customer, try to call them up and negotiate with them. If they value your loyalty, they might waive the fee.
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