New Annual Fee: Should I Pay Up or Move On?
Photo by Stefan Baudy [/caption]
Dear Creditnet: I just received information in the mail Saturday that Citi Platinum Select will now start charging an annual fee of $60. I have had this card since 1989. Of course there are ways to avoid that fee, but should I just start looking for another credit card?
Answer: We've heard from several other Citi customers who received the same notice last week, but it doesn't appear to be a change Citi is making across the board for all Platinum Select cardholders. At least not at the moment. If you choose to immediately close the card and take your business elsewhere, your credit score will suffer a hit since your credit utilization will increase and your length of credit history may shorten. Those two factors alone account for almost half your FICO score.
However, that may not be a big deal if you aren't in the market to finance a home or car in the coming months and have other backup credit cards waiting to take its place. So, if you can afford the credit hit for awhile and don't necessarily need the open credit line, then go right ahead and cancel. I'm sure you can find a better way to spend $60.
Don't forget to at least ask Citi to reconsider the annual fee when you call to cancel. You may be surprised at their response. Now, some people might think $60 is a reasonable fee in order to bank rewards points for purchases, keep an open line of credit, and retain a higher credit utilization ratio. It all depends on your perspective and financial goals. In addition, the notifications we've heard about have stated that the fee will be waived for anyone that spends over $2,400 on the card per year. If this is your primary credit card, that may be an easy target to hit over 12 months.
As the CARD Act of 2009 is set to take effect on 2/22, this is an issue all of us, regardless of credit history, may unfortunately get quite used to dealing with in the coming years. Other revenue streams continue to dry up for credit card companies, but the mighty annual fee isn't going anywhere. And Citi, as well as other major credit issuers, will certainly be running tests to try and determine just how much American consumers are willing to take before moving on.