Bank of America and Citigroup Reportedly Testing New Annual Fees for Customers with Strong Credit and Repayment Histories
Bank of America and Citigroup are apparently testing out a radical new idea - making their "best" customers (meaning those with very good and near-perfect credit) pay more money.
The idea? Charge a new annual fee (reportedly between $29 and $99) to those people who religiously pay off their credit card balances every month. You know, those people that the credit card industry doesn't make very much money off of.
The two banks are apparently "testing" the idea by sending out notices to a small batch of customers. If there aren't widespread cancellations as a result of this new practice, then you can safely assume that many more customers will be charged the new annual fees as well.
Analysts believe that many more banks will follow in the footsteps of Bank of America and Citigroup if the new fees are met without too much resistance (no kidding).
Banks are currently hurrying to jack up interest rates and fees before new industry regulations come into effect.
Many people who carry balances have seen their interest rates increase substantially over the past year or so. Credit card companies blame a weak economy and rising delinquencies for the sudden increase in interest rates. Others argue that the increase in rates are creating more delinquencies, and that people who carry balances are currently caught in a vicious circle.
In addition to interest rates increasing nearly across the board, many credit card companies have also chosen to increase annual fees and decrease reward programs. Many cash back and travel mile programs have been scaled back considerably in the past year.
So what's a credit card company to do with someone who pays off their balance every month and doesn't pay any annual fees?
The answer - slap them with a new annual fee and hope that they pay.
Credit card companies are looking to charge just the right amount of money that won't sufficiently anger people enough so that they decide to cancel their cards. Bank of America and Citigroup both feel that the "sweet spot" is between $29-$99 per year.
Will people with good credit pay these new fees, or will they cancel in protest? We should soon find out..
Source: Got Perfect Credit? You Could Be Charged For It!
Filed under: General Knowledge