Have you heard? Bank of America is going to charge "a small number of customers an annual fee, ranging from $29 to $99." It seems that the ones that will get charged are the people that pay their bills in full every month.
Citigroup is now charging annual fees - if you don't charge at least $2400 annually. Other banks are charging inactivity fees if customers don't use their credit cards during a specific period of time. One article estimated that if you pay your bill every month in full - you won't be able to find a credit card with no annual fee within one year. That will REALLY frustrate me.
In other words - if they don't make enough money off of you (through interest payments or through percentages made off of your purchases) - they will find another way to make money off of you. My dad always taught me to pay off my credit card bill every month. I've never carried a credit card balance - ever. And because I've used credit cards responsibly, I'm going to get penalized. There is something very frustrating about that.
A majority of my purchases are with a debit card, but I still use a credit card regularly. I earn miles and there is no annual fee. If that changes - I will be bummed.
This really does have a point... I'll make it tomorrow. I've been doing a lot of thinking about debit cards and credit cards and our culture's addiction to stuff which causes them to live beyond their means.
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I saw this article yesterday and we are bummed too. We use Chase Freedom and pay it off every month (no interest) and get cash back from them If we hold out until our reward is to 200 we get 250 (50 for FREE!). That will TOTALLY bum me out! That's our "fly family to visit us" fund!! booo! I'll have to check in to see your sequel post tomorrow.
Posted by: Terri Mackmer | October 21, 2009 at 11:45 PM
This is just WRONG!!!
Posted by: Cheri | October 22, 2009 at 05:00 AM
We're in the same boat - have never had a credit card balance, pay it off every month, and get cash back. We hadn't heard about this news story before your post here, but do agree that we should not be penalized for being good managers of our finances.
Posted by: Chris | October 22, 2009 at 08:08 AM
Is it wrong for credit card companies to “penalize” “good” people? Think about it. Companies provide products or services to consumers, who then purchase these items for their use, allowing the companies to make a profit and to continue providing the product or service. This is the American free enterprise system. A bank will loan you their money for you to use in any way you like, and you pay them a fee, in the form of interest for the use of this money. Credit card companies, like any other business exist to make a profit. They have formed agreements with businesses all across the country that allow you, the consumer to use a little piece of plastic to purchase the items you need or want. Essentially they are loaning you their money and are charging you a fee, in the form of interest for the use of this money. In addition, each month they send you a detailed account of all the purchases you made the previous month.
But wait, there’s more! In order to be more competitive (a good thing in a free market economy) they also offer incentives for using their card. These range from cash back, bonus points, free air miles, no annual fee, you name it, and all just for using their card. Not only that, but almost anyone can get a card!
Do they know that some people will purchase items on their card and at the end of the month pay off the balance completely? Of course they do. Well, if these people don’t pay any interest, how does the credit card company charge them for using their money? They don’t. You mean that these people have all the benefits of using the card – a convenient method of purchasing items, a monthly detailed record of their purchases, all the free stuff – and they don’t have to pay for it? Yep.
Why would the credit card companies allow this? Certainly a bank wouldn’t loan you their money and not charge you for it. It’s because they know that the vast majority of the people using the card will pay only the minimum amount each month (which is the interest, or fee) and this will make up for the few people who pay the full balance.
So why start charging an annual fee now to people who are so good at paying their bills? I don’t believe that’s the correct question to ask. Maybe we should ask ourselves why we think we’re entitled to a free loan. The free enterprise system being what it is, there will be times when the economy, or supply and demand, or a number of other factors will cause companies to change their incentive plans, or even change the price they charge for their product. Regardless of the reason, why are we so hesitant about providing a fair compensation for a service we use every day?
Can you see the dark side of human nature? It’s all about us. Nothing is free – not in this physical life and certainly not in the spiritual life. Christ had to pay our debt with his life. Shouldn’t we be willing to follow the rules of society and pay a fair price for a service we use?
Posted by: Angelo Pascucci | October 23, 2009 at 01:39 PM
This is interesting. We are part of the "no balance" club and appreciate the flexibility (and rewards) that we get for using our credit card. I don't want to be paying a fee for my credit card but understand that I may have to put some skin in the game to continue to utilize the services that they provide to me. I do not think that it is completely unreasonable for me to pay an annual fee (only a little unreasonable) as I love not having to carry cash when on vacation and I do like the perks we get as a result of using the card. If our card started charging a balance we would look elsewhere for sure, but I guess I don't share the same level of outrage as most on this.
Posted by: Mark D. | October 23, 2009 at 01:44 PM
Angelo....you are my hero for the day! Capitalism rocks!
Posted by: Eric | October 23, 2009 at 04:27 PM
Angelo -
I don't disagree with most of what you are saying. I'm just saying it is a bummer to have to start paying for something that has been free all along.
Remember one important point - credit card companies DO make money off of my purchases - even without an annual fee or interest payments. They make between 1.6% and 3% with every purchase I make. Now they are making money from the consumer (through an annual fee) and from the companies I purchase from - by taking 1.6% to 3% away.
I am thankful I've had free cards all of my life and I'm disappointed it is discontinuing, but I'm not a communist who would cry "unfair." It is a free market society. I just hope a company comes along and fills the void. I need a credit card, but don't want to pay for it.
You say it is all about us. I would say it is about being the best steward of the money God has given to me.
I also think that mortgage companies offered mortgages to people who couldn't afford it, and it resulted in the mortgage crisis. I think credit card companies have done the same thing to themselves. They offered cards to people with terrible credit and are paying the consequences. And some of those consequences are that I have to begin paying an annual fee.
I don't think it is all about ME wanting things free. I think it is about too many credit cards companies offering too many cards to too many people - and our entire society will be "paying" for it. And by that - I don't just mean annual fees. I mean another economic crisis because of credit cards - not mortgages.
Posted by: David Whiting | October 23, 2009 at 05:51 PM
Eric -
Isn't capitalism based on greed? Isn't greed necessary for capitalism to truly work? If so - does it ROCK?
I think it is the best system until Christ returns, but I don't think it is a sinless system. It is part of living in a fallen world. It is the least of economic evils available to mankind.
At least that is what it seems to me from my non-economist mind.
Posted by: David Whiting | October 23, 2009 at 05:55 PM
I do not believe that capitalism is based upon greed. To the contrary, I believe that our system (as orginally intended) is actually based upon stewardship.
The parable of the talents exemplifies captialism done right: men who were wise stewards and who earned money for their master were referred to as "good and faithful servants" while the man who buried his talent was cast out "into the darkness where there will be weeping and gnashing of teeth."
Discovering and developing one's talents and abilities to earn a profit is not inherently greedy--it really depends upon the motive.
As you stated--it may not be an entirely sinless system, but it's surely the best economic system ever to be devised by man.
Posted by: Eric | October 23, 2009 at 11:15 PM