At the risk of sounding smug, sometimes I feel like I’ve mastered the credit card game.
I get 1 percent cash back on my rewards card. And because I pay it off in full every month and it has no annual fee, my credit card bank is essentially paying me a dividend on top of giving me an interest-free loan every month. I consider it a bonus for being responsible with credit.
However, Citigroup is changing the rules. AmericanBanker.com reports:
Citi has been informing some of its cardholders that they will be charged an annual fee of $30 to $90 unless they spend a certain amount per year, usually $2,400.
Annual fees, once common, largely disappeared in the 1990s, and last year accounted for only 4%, or $3 billion, of issuers’ total fee income, according to the card advisory firm R.K. Hammer.
But Robert Hammer, the Thousand Oaks, Calif., firm’s chief executive, said Thursday that he expects that number to “rise substantially” in the next six months, and predicted that by 2010 issuers will earn at least $9 billion from annual fees.
“It’s a necessary cost of doing business” in light of the law’s restrictions on interest rates and other pricing, he said. “The old business model’s been pretty much decimated.”
It’s a frustrating setback for consumers. Cards with annual fees typically offer much better rewards than my measly 1 percent cash back.
Take the American Express Centurion, a.k.a. the “Black Card.” It carries a whopping $2,500 annual fee in addition to a $5,000 initiation fee — but in return, customers receive free airline tickets for traveling companions, personal shoppers at stores like Gucci and Neiman Marcus, and 24/7 international concierge services.
At least for Black Card holders, they are choosing to pay that premium for executive-level perks. But I doubt Average Joe wants to swallow $90 a year for the privilege of using plastic.
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