Dear Rewards Credit Cards, Bub-Bye!

And thus begins the end of the “have a Rewards Credit Card and pay it off every month” conversation:

Starting next year, Bank of America will charge a small number of customers an annual fee, ranging from $29 to $99. The bank has characterized the fee as experimental. But card holders who have never carried a balance or paid late fees could be among those affected.

Citigroup, meanwhile, has started charging annual fees to card holders who don’t put more than a specific amount on their cards, typically $2,400 a year. Other banks are charging inactivity fees if customers don’t use their credit cards during a specific period of time. You heard that right: You could be spanked for staying out of debt.

For any of us that keep a credit card ‘just in case’, it will be much more difficult to rationalize with an annual fee. After all, the credit card companies still make money off of the ‘pay off the balance every month’ folks. They still get the fees charged to the retail locations where the card is used. If credit card companies scare away these customers, they are looking the transaction fees.

So what happens if you are one of the lucky people chosen for this “experimental” concept?

•Call and complain. Check your credit score first to make sure you’re on solid ground, says Adam Levin, founder of Credit.com, a consumer website. If you have a good score and you’ve been a good customer, the lender may be willing to waive the fee to keep your business.

•Weigh the benefits of rewards against the annual fee. The days when you could get a rewards card with no annual fee are numbered, Arnold says. If your rewards card charges a fee, you’ll need to figure out whether the value of the rewards exceeds the fee.

•Leave. If your card issuer won’t waive the fee, you’ll have a choice: Pay the annoying fee or close your account. Unfortunately, this decision isn’t as clear-cut as it sounds, because closing an account could hurt your credit score.

Of course, you could always cancel the cards and have an emergency fund instead.

via Latest bank fee is for paying off credit card on time every month – USATODAY.com.