The recent CARD legislation along with mounting losses at Bank of America’s credit card division and other places have prompted many credit card issuers like Fifth Third Bank and others to re-enact credit card inactivity fees.
Credit card inactivity fees are typically levied when a cardholder does not use their card for an extended amount of time (usually around 6 month or more although it can vary from bank to bank) or when a cardholder does not meet minimum spending requirements.
Some of the credit card issuers that have recently announced that they will be imposing credit card inactivity fees include the following:
- Fifth Third Bank announced this June that they would begin charging a credit card inactivity fee of $19 if cardholders have not used their credit card in the last 12 months (Source: USA Today).
- Citigroup Inc. charges a higher interest rate to cardholders who do not use their credit card that often. Technically, what Citigroup does is offer a lower interest rate rebate to those cardholders who use their credit card a certain number of times so those who use their Citigroup credit card a lot will earn a lower interest rate than those who do not use their Citigroup card that often. In effect, it is exactly the same thing to say that Citigroup Inc. charges a higher interest rate to cardholder who do not use their credit card that often as to say that Citigroup offers an interest rate rebate to those who use their card more often but of course we know which variation is the more marketing friendly version (Source: Bloomberg)
- Bank of America is considering charging annual fees to select BOA credit card holders (less than 1/2 of 1% of all Bank of America credit card holders will get hit with an annual fee according to a BOA spokesperson). While BOA may not necessarily care to mention the words inactivity fee what these new annual fees most resemble is not a standard annual fees but is probably much closer in effect to an inactivity fee since they will be selecting only a very small percentage of cardholders for the fee. (Source: Bloomberg)
In the case of Fifth Third Bank it is actually pretty reasonable to charge a small $19 fee as 12 months is a long time to have not used a credit card. What burns me up even more is when banks decide to just abruptly cancel credit cards because they have not been used in a long time (which in turn hurts the former cardholders credit score). I personally would much prefer to just pay a $19 fee rather than get a credit card I use infrequently just canceled without notice.
On a positive note here are some of the credit card companies and banks that DO NOT have credit card inactivity fees:
- JP Morgan Chase & Co.
- Capital One
The CARD legislation now bans all inactivity fees on credit card accounts unless the card has been inactive for at least 12 months so the upside is that as long as you use your credit card at least once every 12 months then you will never be hit with an inactivity fee while the downside is that since the CARD legislation places onerous regulations on the credit card companies ability to charge fees then it will likely be even more difficult to get access to credit when you need it.
As always, the informed consumer is the smart consumer. Be sure to do your research, read all of the fine print, and use tools like our free credit card finder to compare your options.
What do YOU think about credit card inactivity fees? Are banks justified in charging inactivity fees? Is the new CARD legislation restricting inactivity fees a good thing?
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