New inactivity fees on credit cards

ayabe

Diamond Member
Aug 10, 2005
7,449
0
0
"Dec. 1 (Bloomberg) -- Amy Schiffman has had a Fifth Third Bancorp credit card for eight years to guard against unexpected overdrafts on her checking account. Now the bank wants to charge her $19 for not using it.

“If you’re not thinking about the card, you might forget to pay the fee, and then you’ll be facing another late fee on top of it,” said Schiffman, 26, a Web designer in Lansing, Michigan.

Credit card issuers, facing the highest level of delinquencies since April, according to Moody’s Investors Service, are reviving inactivity charges and reworking other fees in an effort to stem declining revenue.

Fifth Third, based in Cincinnati, added the fee for the majority of its cards in June, in part to offset increasing servicing costs, said spokeswoman Stephanie Honan. “We want to encourage active use and management of the accounts,” Honan said.

Inactivity fees have been used before, said Linda Sherry, director of national priorities with Consumer Action in Washington, who conducts the group’s annual survey of credit- card fees. Often they’ve been waived if the consumer used the card periodically, Sherry said.

“If you’re keeping the card in a drawer because of the safety it provides, use it a few times in a year,” Sherry said.

Managing Debt

Many U.S. consumers are trying to manage debt, which was $842.6 billion as of Nov. 18, down 1.7 percent from a year ago, by paying off credit cards and then not using them. They refrain from canceling them because that may hurt their credit scores, because their ratio of debt to available credit would go up, said Nick Bourke, manager of the safe credit-card project at the Pew Charitable Trusts in Washington. The so-called utilization rate helps determine a credit score.

“If you’re trying to get out of debt, it’s a real problem,” Bourke said. If consumers use the cards, they add to their balances. If they don’t use the cards, they face a fee, he said.

Fifth Third, Ohio’s largest lender, is the 16th-largest issuer of U.S. credit and debit cards, according to the Nilson Report, an industry newsletter based in Carpinteria, California. Larger card lenders are also testing fees for customers who don’t use the cards enough.

Citigroup Inc. varies the interest rate it charges customers based on how often they use their cards, according to letters the company sent out in November to cardholders. Customers get back 10 percent of their total interest each month if they exceed a set amount of purchases.

Rebate Varies

The amount of spending needed to qualify for the rebate depends on their payment history with the bank, the letters said. A customer with a $35 monthly finance charge may see a $3.50 credit in the same month’s bill. Customers can opt out, paying off existing balances under current interest rates until the card expires. They also may get lower rates if they agree to transfer other card balances to Citigroup, according to the letters.

“These actions are necessary given the doubling of credit- card losses across the industry,” said Samuel Wang, vice president of public affairs at New York-based Citigroup. “Nearly all of our customers now have the opportunity to earn back a portion of the increase each month. We want to reward our customers for doing more business with Citi.”

Fee Test

Bank of America Corp. is looking at annual fees ranging from $29 to $99. The charges were part of a change in terms for fewer than one-half of one percent of all Bank of America’s cards, said Anne Pace, a spokeswoman for the Charlotte, North Carolina-based bank. It’s a test, and the company hasn’t made any decisions about the wider use of annual fees, she said.

“We’re trying to get a better understanding on the value customers place on their cards,” Pace said. “The fee is based on the type of card and the benefit it provides to the customers.”

Bank of America, JPMorgan Chase & Co., the biggest U.S. credit-card lender, Capital One Financial Corp., the third- largest issuer of Visa Inc. cards, and Discover Financial Services don’t have inactivity fees.

Federal Reserve rules announced in July to implement credit-card consumer protections would stop inactivity fees on accounts that customers cancel and pay off when they reject a rate increase, Bourke said. Inactivity fees would probably be allowed for customers who simply stop using a card and pay down the balance without actually closing the account, Bourke said.

Delinquencies Rise

Delinquencies on loans at least 30 days overdue, considered a sign of future defaults, rose to 6.12 percent in October from 5.97 percent in September, Moody’s Investors Service said in a Nov. 20 report, the highest level since April.

New fees are often matched by other banks after judging public reaction, said Bill Hardekopf, publisher of LowCards.com, a Web site that allows consumers to compare terms on more than 1,000 U.S. cards.

Fees have proliferated since President Barack Obama signed the Credit Card Accountability, Responsibility and Disclosure Act May 22, Hardekopf said, which sets limits on rates and other terms for credit cards.

“These are for-profit companies,” Hardekopf said. “They want to make as much money as possible. This new law has tied their hands, in their view.”

Schiffman, the Web designer, avoided the charge by using her card. “It didn’t seem fair,” she said. “I was being a good customer by not overdrawing the account.”

Inactivity fees haven’t been widespread because of consumer resistance, said Gerri Detweiler, a personal-finance expert with Credit.com, a consumer-education Web site.

“This is a different environment,” Detweiler said. “Companies don’t seem to care if they lose customers. It could stick this time.” "

http://www.bloomberg.com/apps/news?pid=20603037&sid=auFDSb2m0X4w


I'm trying to find a way to side with the banks on this but I cannot justify it, to me it seems like yet another way to punish those who are responsible to cover for those that aren't.

There's a touch of irony to be found here as well, in the last few months this shitty 5th/3rd bank (what a horrible name) has been running ads in FL showing this guy walking past his coworkers' Audi's and BMW's while the voiceover touts how our hero is still driving his college car, cut to his house where his wife/GF whatever has one in the oven and how he has other priorities.

Well good for him, does he know that his emergency use 5th/3rd credit card just charged him $29 for nothing? Thanks for being responsible Mr. Twentysomething, here's a punch in the face.
 

RyanPaulShaffer

Diamond Member
Jul 13, 2005
3,434
1
0
I'm trying to find a way to side with the banks on this but I cannot justify it, to me it seems like yet another way to punish those who are responsible to cover for those that aren't.

There's a touch of irony to be found here as well, in the last few months this shitty 5th/3rd bank (what a horrible name) has been running ads in FL showing this guy walking past his coworkers' Audi's and BMW's while the voiceover touts how our hero is still driving his college car, cut to his house where his wife/GF whatever has one in the oven and how he has other priorities.

Well good for him, does he know that his emergency use 5th/3rd credit card just charged him $29 for nothing? Thanks for being responsible Mr. Twentysomething, here's a punch in the face.

Yes, I agree...it's a horrible business decision. If any of my cards try this, I would raise cain, demand an instant refund, report them to the BBB, perhaps even report them to the Chamber of Commerce, cancel my card with them immediately and never do business with that company again.

Most consumers aren't as principled as me though. :)
 

blackangst1

Lifer
Feb 23, 2005
22,914
2,359
126
I saw something on MSNBC about the new CC laws coming into effect soon and they mentioned alot of companies are also closing inactive cards. So the advice is good: use it once or twice a year. The removal of a 10+ year CC off your report has VERY negative effects on your FICO. You should NEVER close CC accounts.
 

Chunkee

Lifer
Jul 28, 2002
10,391
1
81
i received notice of my card being closed immediately due to activity...what I am wondering if the "closing" of the accounts will negatively impact your credit rating...

no matter what you do... you are governed and routinely fucked by banks. they control everything. a rigged game.
 

ayabe

Diamond Member
Aug 10, 2005
7,449
0
0
Depends on how long you've had the account open and what impact if any the closure of the account will have on your available credit.

If you don't have any balances and haven't had the card very long, then it won't hurt your score.

But if you've got two cards both with a $5000 limit, one of which has a $2500 balance, well that will screw you big time as your available credit just went from $7500 to $2500.
 

Genx87

Lifer
Apr 8, 2002
41,095
513
126
These idiots will drive away responsible consumers while continuing to servie the irresponsible. But what do they care? When it gets rough again Uncle Sam will bail them out and make the responsible pay anyways.
 

blackangst1

Lifer
Feb 23, 2005
22,914
2,359
126
Depends on how long you've had the account open and what impact if any the closure of the account will have on your available credit.

If you don't have any balances and haven't had the card very long, then it won't hurt your score.

But if you've got two cards both with a $5000 limit, one of which has a $2500 balance, well that will screw you big time as your available credit just went from $7500 to $2500.

Kind of. The biggest determination is aging. If the account is more than 5 years old the impact could be pretty big. We already know his balance is zero, therefore his debt:available ratio will go up, affecting score. Either way, his FICO will take a hit.
 

KK

Lifer
Jan 2, 2001
15,903
4
81
Kind of. The biggest determination is aging. If the account is more than 5 years old the impact could be pretty big. We already know his balance is zero, therefore his debt:available ratio will go up, affecting score. Either way, his FICO will take a hit.


How big of a hit are you talking about, 10 - 20 points?
 

WHAMPOM

Diamond Member
Feb 28, 2006
7,628
183
106
"Dec. 1 (Bloomberg) -- Amy Schiffman has had a Fifth Third Bancorp credit card for eight years to guard against unexpected overdrafts on her checking account. Now the bank wants to charge her $19 for not using it.

“If you’re not thinking about the card, you might forget to pay the fee, and then you’ll be facing another late fee on top of it,” said Schiffman, 26, a Web designer in Lansing, Michigan.

Credit card issuers, facing the highest level of delinquencies since April, according to Moody’s Investors Service, are reviving inactivity charges and reworking other fees in an effort to stem declining revenue.

Fifth Third, based in Cincinnati, added the fee for the majority of its cards in June, in part to offset increasing servicing costs, said spokeswoman Stephanie Honan. “We want to encourage active use and management of the accounts,” Honan said.

Inactivity fees have been used before, said Linda Sherry, director of national priorities with Consumer Action in Washington, who conducts the group’s annual survey of credit- card fees. Often they’ve been waived if the consumer used the card periodically, Sherry said.

“If you’re keeping the card in a drawer because of the safety it provides, use it a few times in a year,” Sherry said.

Managing Debt

Many U.S. consumers are trying to manage debt, which was $842.6 billion as of Nov. 18, down 1.7 percent from a year ago, by paying off credit cards and then not using them. They refrain from canceling them because that may hurt their credit scores, because their ratio of debt to available credit would go up, said Nick Bourke, manager of the safe credit-card project at the Pew Charitable Trusts in Washington. The so-called utilization rate helps determine a credit score.

“If you’re trying to get out of debt, it’s a real problem,” Bourke said. If consumers use the cards, they add to their balances. If they don’t use the cards, they face a fee, he said.

Fifth Third, Ohio’s largest lender, is the 16th-largest issuer of U.S. credit and debit cards, according to the Nilson Report, an industry newsletter based in Carpinteria, California. Larger card lenders are also testing fees for customers who don’t use the cards enough.

Citigroup Inc. varies the interest rate it charges customers based on how often they use their cards, according to letters the company sent out in November to cardholders. Customers get back 10 percent of their total interest each month if they exceed a set amount of purchases.

Rebate Varies

The amount of spending needed to qualify for the rebate depends on their payment history with the bank, the letters said. A customer with a $35 monthly finance charge may see a $3.50 credit in the same month’s bill. Customers can opt out, paying off existing balances under current interest rates until the card expires. They also may get lower rates if they agree to transfer other card balances to Citigroup, according to the letters.

“These actions are necessary given the doubling of credit- card losses across the industry,” said Samuel Wang, vice president of public affairs at New York-based Citigroup. “Nearly all of our customers now have the opportunity to earn back a portion of the increase each month. We want to reward our customers for doing more business with Citi.”

Fee Test

Bank of America Corp. is looking at annual fees ranging from $29 to $99. The charges were part of a change in terms for fewer than one-half of one percent of all Bank of America’s cards, said Anne Pace, a spokeswoman for the Charlotte, North Carolina-based bank. It’s a test, and the company hasn’t made any decisions about the wider use of annual fees, she said.

“We’re trying to get a better understanding on the value customers place on their cards,” Pace said. “The fee is based on the type of card and the benefit it provides to the customers.”

Bank of America, JPMorgan Chase & Co., the biggest U.S. credit-card lender, Capital One Financial Corp., the third- largest issuer of Visa Inc. cards, and Discover Financial Services don’t have inactivity fees.

Federal Reserve rules announced in July to implement credit-card consumer protections would stop inactivity fees on accounts that customers cancel and pay off when they reject a rate increase, Bourke said. Inactivity fees would probably be allowed for customers who simply stop using a card and pay down the balance without actually closing the account, Bourke said.

Delinquencies Rise

Delinquencies on loans at least 30 days overdue, considered a sign of future defaults, rose to 6.12 percent in October from 5.97 percent in September, Moody’s Investors Service said in a Nov. 20 report, the highest level since April.

New fees are often matched by other banks after judging public reaction, said Bill Hardekopf, publisher of LowCards.com, a Web site that allows consumers to compare terms on more than 1,000 U.S. cards.

Fees have proliferated since President Barack Obama signed the Credit Card Accountability, Responsibility and Disclosure Act May 22, Hardekopf said, which sets limits on rates and other terms for credit cards.

“These are for-profit companies,” Hardekopf said. “They want to make as much money as possible. This new law has tied their hands, in their view.”

Schiffman, the Web designer, avoided the charge by using her card. “It didn’t seem fair,” she said. “I was being a good customer by not overdrawing the account.”

Inactivity fees haven’t been widespread because of consumer resistance, said Gerri Detweiler, a personal-finance expert with Credit.com, a consumer-education Web site.

“This is a different environment,” Detweiler said. “Companies don’t seem to care if they lose customers. It could stick this time.” "

http://www.bloomberg.com/apps/news?pid=20603037&sid=auFDSb2m0X4w


I'm trying to find a way to side with the banks on this but I cannot justify it, to me it seems like yet another way to punish those who are responsible to cover for those that aren't.

There's a touch of irony to be found here as well, in the last few months this shitty 5th/3rd bank (what a horrible name) has been running ads in FL showing this guy walking past his coworkers' Audi's and BMW's while the voiceover touts how our hero is still driving his college car, cut to his house where his wife/GF whatever has one in the oven and how he has other priorities.

Well good for him, does he know that his emergency use 5th/3rd credit card just charged him $29 for nothing? Thanks for being responsible Mr. Twentysomething, here's a punch in the face.

No. No. No. They (banks) are punishing BAD customers, those that do not make them a profit by responsibly using their cards. GOOD customers make profit by late fees, minimum payments, etc.

edit; forgot the merchant fees and other obscure ways money flowing through the credit system makes them (banks) money.
 
Last edited:

IGBT

Lifer
Jul 16, 2001
17,946
130
106
doesn't congress want to get rid of credit cards? if you close the account with a zero balance and tell the bank to indicate it was a user requested termination it will have no impact on credit report. I've opened and closed plenty of these things over the years and am now down to one card.
 

Robor

Elite Member
Oct 9, 1999
16,979
0
76
i received notice of my card being closed immediately due to activity...what I am wondering if the "closing" of the accounts will negatively impact your credit rating...

no matter what you do... you are governed and routinely fucked by banks. they control everything. a rigged game.

I recently had a credit union visa for 20+ years closed due to inactivity.
 
Nov 30, 2006
15,456
389
121
I'm not a big fan of government regulation..but this is clearly one area of our financial system that needs a little Congressional help. Where's Barney Frank when you need him?
 

Gunslinger08

Lifer
Nov 18, 2001
13,234
2
81
I'm pretty surprised some of my cards haven't been closed yet. I haven't used some of them in 5+ years.
 

PokerGuy

Lifer
Jul 2, 2005
13,650
201
101
This is yet another way the banks rip you off of course, but it's pretty easy to avoid. Just use your card once or twice per quarter, pay off the balance in full, and voila, the interest rate doesn't matter, and you won't get socked with fees.
 

Ronstang

Lifer
Jul 8, 2000
12,493
18
81
I'm not a big fan of government regulation..but this is clearly one area of our financial system that needs a little Congressional help. Where's Barney Frank when you need him?

Although I agree that the credit card companies have been complicit in the problem there wouldn't be ANY problem if people were not irresponsible and didn't continually spend money they don't have like there are no consequences. It is hard to get people to realize this when our government has the same level of financial discipline. Modern society needs a reset.
 

waggy

No Lifer
Dec 14, 2000
68,145
10
81
yeap. i have 1 card i use for emergancy's. i just got a letter saying i am going to be charged a fee for not useing it.

soo. i can't decide if i want to keep it.
 

StageLeft

No Lifer
Sep 29, 2000
70,150
5
0
We have three cards, regularly use one. The other two I use every several months for a tank of gas. If either starts charging me silly sh*t I will cancel it. My credit score is e-penis ridiculous so I could always find somebody else who loves me and won't charge me.

If your credit is good and you have several accounts I can't imagine an old one closing really matters, and frankly if you're the kind of person having cards closed to inactivity you probably have good credit anyway in which case a few points here or there doesn't much matter anyhow.
 

cubeless

Diamond Member
Sep 17, 2001
4,295
1
81
How big of a hit are you talking about, 10 - 20 points?

i had a half dozen cards closed due to inactivity... i had a bunch of no fee cards that i used to air out once a year, but i hadn't used them for a couple years... it didn't make any difference on my score... it's a factor if you have other issues, but of itself it's not so big a deal...
 

Thump553

Lifer
Jun 2, 2000
12,667
2,423
126
I have a couple of cards I've accumulated over the years that I keep open specifically for emergencies. I haven't gotten any letters like this (yet) but starting last summer I made it a point to do at least one charge per month on each card. PIA but with doing bill pay online not so bad.

What I'm pissed about is Citicorp just raised the interest rate on my main card to 24.99% effective about two weeks after their notice. I've been with them for a dozen years or so. I do pay my balance in full every month (except when I make an error) so they don't make much $$ off me-but they do make a bunch off the merchants charges.

Time to switch to another card as my primary card, just to show Citi that I don't like their gouging. Twenty five percent interest on a great credit risk when banks are paying us a fraction of one percent interest on our savings? How piggish can they be?
 

StageLeft

No Lifer
Sep 29, 2000
70,150
5
0
I have a couple of cards I've accumulated over the years that I keep open specifically for emergencies. I haven't gotten any letters like this (yet) but starting last summer I made it a point to do at least one charge per month on each card. PIA but with doing bill pay online not so bad.

What I'm pissed about is Citicorp just raised the interest rate on my main card to 24.99% effective about two weeks after their notice. I've been with them for a dozen years or so. I do pay my balance in full every month (except when I make an error) so they don't make much $$ off me-but they do make a bunch off the merchants charges.

Time to switch to another card as my primary card, just to show Citi that I don't like their gouging. Twenty five percent interest on a great credit risk when banks are paying us a fraction of one percent interest on our savings? How piggish can they be?
Citigroup can tongue clean my behind. I have had a card with them for four years and it's consistently gotten worse despite an exemplary history with them, from 5% cash back down to like 1% crap points and a higher rate. This is one of the three I basically never use.
 

nobodyknows

Diamond Member
Sep 28, 2008
5,474
0
0
I saw something on MSNBC about the new CC laws coming into effect soon and they mentioned alot of companies are also closing inactive cards. So the advice is good: use it once or twice a year. The removal of a 10+ year CC off your report has VERY negative effects on your FICO. You should NEVER close CC accounts.

This kind of thi king is exactly why they are trying to charge for having a card but not using it.

I personally fail to see why closing a credit card account should affect your credit rating. If anything it shows the person closing the account has some common sense and is being responsible by not leaving loose ends laying around.
 
May 16, 2000
13,526
0
0
I saw something on MSNBC about the new CC laws coming into effect soon and they mentioned alot of companies are also closing inactive cards. So the advice is good: use it once or twice a year. The removal of a 10+ year CC off your report has VERY negative effects on your FICO. You should NEVER close CC accounts.

Attitudes like that are what allow banks to rape customers like this. There are only two options: the government punishes banks for doing it, or customers punish them by not using them (or suing them). It has to be one or the other.
 

TheSlamma

Diamond Member
Sep 6, 2005
7,625
5
81
Good maybe people will limit themselves to 1 card with a reasonable limit and live life the way it's supposed to be, not being an indentured servant at a job so you can pay banks your entire life.
 

JS80

Lifer
Oct 24, 2005
26,271
7
81
These idiots will drive away responsible consumers while continuing to servie the irresponsible. But what do they care? When it gets rough again Uncle Sam will bail them out and make the responsible pay anyways.

At the same time they are borrowing from the responsible ones for 0%.