Wednesday, May 27

Will annual fees turn you off credit cards?

When Congress was considering the new credit card laws, the card companies made quite a fuss. They said that credit cards would become harder to obtain (I'm assuming this is supposed to be a bad thing), rewards cards would become more scarce and annual fees would probably become a basic fact of life.

Frankly, I think it was a bluff. I think the credit card companies were hoping to create a public outcry. Congress would have it heed the constituents' opinions, and the the law would be thrown out.

Of course, even if this had been a bluff, the fact is that no one flinched. I mean, plenty of PF bloggers commented. But overall, we welcomed the changes to the industry.

That makes me wonder if the companies won't follow through on their threats. After all, we proved that we're willing to survive harder credit terms, if it goes hand-in-hand with a more level playing field. So why wouldn't the companies try some of the ideas?

At least in the short term, I would need to keep two cards: one with the balance we're carrying, one for any new charges we have to put through. In the end, I do agree with my mom that two cards is generally a good idea (link). But I would probably keep it to that.

So for me, annual fees aren't enough to make me give up credit cards, even if we could afford to right now. But it has affected which cards I might keep. Tim and I recently decided to get rid of one of our cards. Originally, we had decided to nix the United Airlines card we have through Chase. I had signed up for one to help us get free tickets for our honeymoon. (I had my mom get one too, so we had enough for two people's plane fare.)

We had chosen the United card because it has an annual fee. The fee is payable with rewards miles, but it's still unpleasant to lose potential rewards. Now that annual fees may become commonplace, though, this may become an appealing option.

So what about you? Will you pony up for an annual fee? Will you swear off credit cards altogether? For that matter, do you think the credit companies will follow through with their threats?


Blogger Revanche said...

I'd just stop using cards, probably. I guess that's not the most reasonable answer since if the annual fee was low, it'd still be offset by the rewards, but my first instinct is to wash my hands of them entirely. And I could, too, so it doesn't make a significant difference.

And perhaps they'll follow through because their bluff was called. And because they now do have to find an alternate source of income.

P.S. Your blog isn't updating in Google Reader. Not mine, at least, anyway.

May 28, 2009 at 10:19 AM

Blogger Together We Save said...

I will never use a card again. I am just trying to get mine paid off.

May 29, 2009 at 2:07 PM

Blogger Meg said...

We've never had a card with an annual fee. I just don't get why people would want one when there are so many cards out there without annual fees. Yes, there are some perks that you *might* not get with other cards, but they don't seem like they're worth the money unless you REALLY plan to use them and they are important to you. And I must say, I've been unimpressed by rewards programs in general and don't even use most of the features of the cards I do have.

Plus, study after study have shown that using credit cards increases the amount you spend -- even if you pay them off monthly. Those rewards points and low introductory interest rates are there to entice you to spend and they work.

Having (hopefully) learned our lesson with credit cards, my husband and I have stopped using them and now use our debit cards instead. We have a cash emergency fund that we're growing, too, since I DO NOT trust credit cards in an emergency fund. We JUST paid off an Amex card and they almost immediately closed the account! And previously they had lowered our limit to the amount we owed! It's not like we're risky, either! We have great credit scores, have NEVER paid late on ANYTHING, have a house that is worth more than we owe, and even have a good income, though our debt is still relatively high (though not so bad considering that we owe a lot less than many people our age owe on their homes when you include everything including our mortgage).

Used to be, I'd recommend leaving credit accounts open after they were paid off to help with your credit score and to have the credit there in case of emergencies. However, I am so sick of dealing with credit card companies that my biggest gripe about Amex is that they didn't give us the pleasure of closing the account ourselves.

May 30, 2009 at 4:12 PM


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