Do You Have Great Credit? It Might Cost You Money

• barrieabalard
• November 19th, 2009

First, something I forgot to post last week, along with the holiday links: MarketNut's Retail Madness! blog post on the StockTwits Blog Network. She has ideas and tips for saving money at holiday gift-buying time. MarketNut blogs daily with links to some of the most interesting news to be found in the financial world, so check out her blog.

Now, on to how having great credit could cost you money.

It was bound to happen. All of us with excellent credit who pay our credit cards in full every month and never pay fees or interest don’t make any money for the banks that issue the cards. Now, with new laws restricting what they can charge people with less-than-perfect credit, two banks (so far) are rolling out a program that will charge those of us with excellent credit a fee for the privilege (I use the word loosely) of carrying their credit cards. The banks are Bank of America and Citigroup. You can read more about it here. (The banks are likely to contact you by mail rather than phone, so read anything you receive in the mail carefully.)

If you are contacted, you don’t have to accept an annual fee. Call the customer service number for the card and tell them that you won’t pay it. A lot of the time, fees are negotiable—you can refuse to pay the fee, telling them you won’t pay a cent for their card, and that you’ll close your account if they won’t let you use the card without an annual fee. Of course, to do this, you have to be willing to close your account. Otherwise, your threat is less effective. But, if you’re willing to do so, you might get them to back down. It also might not hurt to point out that you have spotless credit and that you’re sure X Bank down the street will be happy to give you a fee-free card to use. If you have great credit and several credit cards in your wallet, closing the account rather than pay a fee might be your best bet. Odds are you won’t miss it if you carry multiple cards. (Of course, you will have to pay any charges that remain on the account after it is closed.)

If you don’t want to close the account because it’s your only card or for some other reason, try to get the bank to lower the fee. Don’t be afraid to haggle—I’ve found a lot of so-called nonnegotiable fees are eminently negotiable. If, for some reason, they won’t lower the fee at all and you truly need the card, at least get something in exchange: a lower interest rate, no late fees, whatever you can think of. Then, start looking for a better card that won’t charge you a usage fee (see below for more on this).

If you do close the account but want to replace the card, you might look at adding an affinity card. After all, if you’re going to pay an annual fee, why not get points or miles for your money? If you drive and use hotels more than you fly, consider a hotel affinity card. Every hotel card I know of is free of annual fees. Pick the hotel chain you stay at most often, and get yourself a new card with no annual fee that will also pay you with free nights on the road. Personally, I like the Choice Hotels (Comfort Inn, etc.) chain and have used their card for years. Those free nights we racked up have saved us serious money. (We always pay off all our cards each month. Remember, an affinity card is no bargain if you’re paying interest on balances, because the interest rates on these cards are usually very high.)

If you fly a lot on one airline, and you don’t mind paying an annual fee to accumulate miles, you can apply for an airline affinity card. All such credit cards have varying fee tiers, and all of them offer some sort of teaser, like 15,000 miles free the first time you use the card.

Of course, you can replace the card with a regular credit card that charges no annual fee. One place to try is Bankrate.com. The site has an entire section devoted to researching credit cards. Just be sure to do your homeword so you end up with the card that’s right for you.

To date, I haven’t been notified about paying an annual fee, and I don’t know anyone who has been. If you’ve been contacted, I would like to know about it, and know how you handled it and what the bank did. If you’re comfortable sharing your story, please comment below. Otherwise, send me a message via Twitter (@BarrieAbalard) and I’ll contact you via direct message so that we can have a conversation about it.

Tickers: affinity credit cards, credit card annual fees, credit card fees, holiday links, MarketNut, personal finance, saving money

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