Ever since the Credit Card Act of 2009 hit the floor of the House of Representatives, credit card companies have been scrambling to rework their business models. The result: millions of consumers are paying higher interest rates, credit limits have been slashed, and millions of people are being denied for new credit. These new “consumer friendly” credit card laws have led to increased fees for credit card transactions ranging from international purchases to balance transfers. And 0% introductory rates, particularly 0% balance transfer offers, have been reduced dramatically.
Now, thanks to the meddling hand of Uncle Sam, annual fees will soon be added to the lists of new costs levied on American consumers. According to Forbes, Bank of America will soon be charging annual fees on some credit card accounts.
Prior to the passage of the Credit Card Act, annual fees were generally attached to two type of credit cards: those issued to subprime consumers and those attached to super-prime rewards credit cards. American Express has long charged hefty annual fees for its top notch rewards programs-and for good reason. Those programs offered consumers substantial benefits that outweighed the cost of the annual fee.
Unfortunately, credit card companies such as Bank of America will soon be charging fees ranging from $29-$99 starting next year to selected accounts based on “risk and profitability.” With this broad mandate, there are far reaching implications for consumers with credit that ranges from average to excellent.
For example, if you pay your card in full every month and thus generate no interest income for the bank, you may be hit with an annual fee for the privilege of using your credit card. And if you used to generate the occasional late or over-the-limit fee, you may be assessed an annual fee because you are risky.
Ultimately, Bank of America will not be the only credit card company to institute annual fees. In all likelihood, annual fees will become the norm in the coming years. And consumers will have little say in the matter. Of course, if consumers react negatively to annual fees, the trend may not catch on. Unfortunately, most of us will have little choice and end up paying some kind of annual fee so banks can recapture the revenue that restrictive new credit card laws are taking from their pockets.
As I’ve written many times before, the Credit Card Act was nothing more than a sideshow designed to show Americans that the Government was fighting back against evil credit card companies. In the end, the Credit Card Act will prove to be nothing more than a tax on responsible consumers. So when I get a notice from Bank of America stating that they will be charging me an annual fee, I’m not going to be mad at CEO Ken Lewis. I’m going to be mad at our elected officials for giving Bank of America no other option to operate a credit card business profitably.
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October 25th, 2009 at 8:39 pm
I guess I will be one of those lucky Bank of America (BOA) customers that will see an annual fee on my credit card account. But fear not. I have the upper hand. I belong to two credit unions and I hold a credit card from each membership. So go ahead BOA hit me with your best shot. And I promise you that I will dump your credit card as easily as I toss out the garbage.
October 26th, 2009 at 9:18 am
Okay, your idea(s) make sense. But let’s be fair, haven’t the credit card companies done a land office business over the years with all their fees? And really, are they actually going broke? I pay my card off each month, and I’ll be darned if I’m going to pay a “fee” for the “privilege” of having their card. I’ll search until I find one more friendly to my credit responsiblity. Although your thoughts on government involvement to “protect” consumers may be on target, I’ve no sympathy for BoA or any other credit card issuer. They’re part of the financial crookery that has been allowed to go on…and their CEOs still make big bucks/bonuses.
October 26th, 2009 at 10:11 am
I’m not saying we should all cry for credit card companies. However, the credit card business is losing hundreds of millions of dollars at the best managed banks, like JP Morgan Chase, and the new rules are crimping their profitability, which will mean more costs passed onto consumers so they can make up for the money they can no longer earn the old way.
October 26th, 2009 at 10:19 am
That’s what you get for being responsible. You obviously would have been much better off if you paid your credit card late every once in a while and bought things you couldn’t afford. Wow, we really do live in strange times.
October 26th, 2009 at 7:39 pm
Please spare me your whining for credit card companies. I worked for half a day at a place where they pushed high Interest cards (25-35%) to people who could clearly not afford them. That is not good business, the credit companies also pushed through the new bankruptcy laws under the racist Bush. Those totally screwed the consumer. Bottom line, credit companies tried to take advantage of people who didn’t know any better and now they are paying for it.
October 27th, 2009 at 8:44 am
Smartest Guy in the Room,
I’m not sure which credit card company you worked for, but I can assure I have no sympathy for the type of company you worked for. In fact, on the bad credit balance transfers page of this website, I don’t list these type of credit cards-I provide consumers reasons not to get them.
As to whining about credit card companies, I guess my position could be interpreted that way as perhaps my point was unclear. Essentially, I believe that credit card companies will find ways to make the money the new laws take from them by charging good customers more and freezing credit from consumers with average and below average credit.
I don’t think the credit card companies are benevolent friends. I think they are businesses that need models to control risk while giving consumers access to credit. Some of the actions of certain credit card companies have been downright evil. But new credit card laws have only made that worse, and what I am most concerned about is the price we will all be paying to make these companies profitable, not the fact that the poor credit card companies are losing money. Believe me, they need to make money or else none of us will have access to credit. Is that what you’d prefer?
November 9th, 2009 at 4:49 pm
Please folks. Just because you pay off your charges monthly and are responsible with your finances is not reason to prevent us from shafting you. Just think about how this will affect our bonuses. We are also working to get all credit card issuers to go along with our gouging the responsible folks.
B of A Chief Gouger
November 10th, 2009 at 11:57 am
lol