I agree with your suggestion. I think the only way to go is ask if there's another card type he can convert his account to that doesn't carry an annual fee. It might just be that they decided to start charging for the accounts with rewards on them.

Cancel it, but wait until January since the fee doesn't start until Feb.

It's not a big deal, there may or may not be a slight decrease in credit score. It's hardly holding his score "hostage".

The card company may be willing to negotiate away the fee, or switch accounts, but otherwise just cancel the account, and go get a new card. It's really not a big deal.

Obviously they do not need the merchant fees you bring in. Exactly how big of a hit would the credit score take, provided you got another card with the same credit limit so your available credit doesn't change? How long would it take to build up the loss?

does he earn enough rewards points to pay the fee?

I agree.

@diasdiem: According to one reference I found, length of credit history counts for 15% of your FICO score. Another site I found suggests shortening your credit history will drop your score 10-15 points for a few months. It's hard to know who's right because the actual formula used to compute the score is a trade secret.

If he's carrying balances he might get an additional hit due to more of his available credit being utilized.

On the whole it's annoying but probably not worth stressing over, unless he's planning on getting a mortgage or something in the near future. In that case I'd keep the card open until after that's taken care of.

I would totally cancel it and not use their services again, and make sure to call them in person to tell them that.

Because the only way to stop these companies from passing their costs onto those of us who are decent customers is to revolt when they try.

I suppose if I was about to try to negotiate for a mortgage, I might not do it, but we're not planning to move any time soon.

My credit score is really good and I'm sure it would recover if I got another card.

The card, if closed, will remain on his credit reports for 10 years.

I HIGHLY doubt this is becoming common....

@kaceetheconsumer: I wonder how hard that would be? Getting another card, I mean. It occurs to me that I've gotten a lot of card offers lately, but all of them have had annual fees.

@wcnghj: In any case, he NEEDS to have more than one card.

I don't see the problem with an annual fee, but $99 seems a bit excessive. It's like they're pissing on him because they're mad about the legislation.

most card issuers aren't allowing consumers to change card products to avoid the annual fee. why would they?

@f5alcon: sure, but it essentially cuts down the rewards yield... which is what the bank is aiming for.

@wcnghj: Since when? I get by just fine with a debit card and a single credit card for emergencies.

Don't spend more than you make, and there will never be a reason for a credit card aside from life's curveballs.

If enough people do this, then credit scores as a whole will drop, and a lower credit score should become better.

Either that or there will be enough populistanger for a politician to get involved.

@Orv: I've recycled at least a few no-fee offers lately, although I'll admit most of them are fee versions of American Express since I have the no-fee card right now.

@kaceetheconsumer: I keep getting them for airline reward cards that have a $99 annual fee. I almost never carry a balance, so a card with an annual fee makes no sense for me.

@Orv: I never carry a balance either, so the ads from Amex are so stupid because they promote services for those who do carry a balance. Or they try to appeal to my small business...which I do not have. It's pretty lame marketing.

@WiglyWorm: I never use debit or cash.

Charge everything besides the mortgage and car payment to the cards, enjoy chargeback protection and 2-5% cashback :).

What if they close your CC account and you are on vacation? Besides, FICO likes around 6 cards.

The amount of power a person's FICO score can potentially have on one's life is really draconian. This is yet another example. Under the current system you're screwed.

You're also screwed if you have a medical emergency that causes you to miss as little as 2 payments by at least 1 day in 6mo.s time. Otherwise the bank will have an excuse to jack your rate up to 30%. What is that? You don't agree? Close your account and screw up your FICO score.

Oh by the way, that new job you were in line for? Sorry, your FICO score shows you're not a dependable person.

@kaceetheconsumer: That's a good point. It seems with all the info they collect on us that they could target their marketing better.

@Neurotic1: One (admittedly small) comfort is that employers usually aren't looking at your *score*, as such. They're usually more interested in missed payments and bankruptcy filings.

@Neurotic1: If the OP opens a new account with a similar or higher credit limit, closes this account and waits 6 months, FICO will hardly be effected.

Only payments 30 days late or later can be report to the credit reporting agencies.

@Crazytree:

Because they're decent, respectable, hard-working, peop....oh wait...they're bankers? Why would they?

@Orv:

Targeted marketing costs money, it's easier to just spam everyone.

/For example, I get letters offering to refinance the mortgage on my rental property (the mortgage was paid in full 7 years ago, so there is nothing to refinance).

/And I've gotten spam from CVS regarding signing up for some perscription plan. Because I filled one prescription with longs (who they just took over) about 5-6 years ago. I don't need a prescription plan because I don't HAVE any prescriptions.

/Since I work with DBs a lot, this kind of laziness kinda ticks me off. How about adding a few where clauses to your query before you spam god and country?

@zarex42: Your credit score is important, but remember this: credit can be rebuilt. The hit you would take for cancelling the card and paying it off wouldn't be nearly as bad as the account going into default (or some other similar thing). If you don't like it, just close the card. If people ask about it when going for credit, tell them the truth: some losers added a $99 annual fee to that card that I didn't want to pay, so I cancelled it. The account is paid in full, let's move on.

@Orv: I'll be shopping for student loans next year and need my score to be as high as possible.

Hence the concern.

Make a youtube video detailing your situation, concluding you will default on your debt if they insist on charging you the fee.

Perhaps they need to readjust the FICO algorithm to take into account real world conditions. If in the real world people are not likely to carry a single individual card for 20+ years, why make it a FICO factor? How about just the length of time you've had continuous credit, regardless or the length of any individual card?

Oh noes! That's my card, too. I'm sure I'll be getting the same exciting offer in the mail, too.

What a screw, if you don't want your credit rating dinged by an account closure.

Mutter, grumble, fume.

Does the bank/company offer a non-rewards card with no annual fee? If so, will they allow you to move your account to that type of card?

I ask because Bank of Montreal up here does that sort of thing. They have a Cadillac Mastercard (1 airmile for every $10 through the card), a general version (1 airmile for every $20) and a basic (no airmiles.) The basic doesn't have an annual fee (the others do) and, if I understand the website correctly, I can "move" between the cards as I see fit.

Cancel it. Your credit score doesn't ACTUALLY matter. If anything, this is a good impetus to get into a save-up-then-buy mentality.

I say drop them. Competition for good cardholders will almost certainly mean that no-fee cards are not going away completely. Get one of those first and then dump these jackasses. Take the hit on the FICO. Why pay them for something that you have been getting for free ?

These are the early symptoms of the withdrawal pains that the card companies and their customers will be going through as the card companies business model changes due to the new law. As any junkie can tell you ,the pain really hurts at first and you just aren't sure that you can tough it out. But the reward on the other end of the process will make you wonder how you got hooked in the first place.

Good luck whatever you do...

Here's how he can look at it... 27c a day for every day of the year or get a new card. If he doesn't want to spend an extra 27c a day, then chuck that card away. There are plenty of other card vendors who don't charge fees.

I vote the latter option but there's no point losing sleep over it.

@kaceetheconsumer:

I just did that with Cap1. I was pretty angry at them for charging me some fee which I believed was a mistake on their part, and they didn't agree, so I told them I'm canceling. They sent me to retention. The guy asked me why I was canceling and I said because A) the interest rate is ridiculous B) your customer service is terrible, and so is your website and C) I don't want to pay your fees anymore, regardless of who is at fault for them. He began spouting off about how the industry as a whole is suffering blah blah blah economy bad, mortgage crisis, etc. so it was justified, and I said OK, so then I'd like you to remove the fee. He said he couldn't do it. So I said "Wait a second.. you want to charge me more money because you made a huge mistake as a whole industry, nearly destroying the country and fucking tons of people over in the process, with the mortgages including plenty from your own company, and you think that is perfectly reasonable, but when I make a "mistake," even though it really wasn't one, you want to charge me more money. By your logic, I should be charging YOU." He had no more to say and canceled my account. Never been happier to not have to deal with that garbage.

@Orv: Something that I knew at one time (but have since forgotten): Do you need to have that 'old' account active to count towards your 'length of history', or does Fair Isaac just look at the actual length of your credit history, both open accounts and ones that were opened many years ago but are now closed?

I know that my oldest cc account was opened in 1996, but closed in 2003, but I haven't bothered to look into whether or not that account is helping the age of my history...

I'd look for another rewards card with no fee. If I couldn't find one, I'd compare rewards after fees of the cards available and pick the one that left me with the most rewards.

1) Do as Laura suggests
2) Start shopping for another card now, cash out any rewards ASAP, and switch.
3) Go ahead and ask them if they will waive the fee for the first year since you've had the account for a while. Then shop around for another card.
4) Pay the fee, just for a year and shop around in the meantime.

If you're looking at student loans, generally government-backed loans don't take into account your credit score too much because usually the people that are applying for them have no credit history anyway. The private student loans are poison, but if that's the way you have to go then you will need a decent score.

There are online calculators that can estimate the hit to your score depending on what you do. Hit them up.

Personal opinion: FIA is crap. Go somewhere else.

Your solution depends on your situation. How old are you? What school are you going to? How old is the credit card account? What is your score now? Is there anything negative in your credit history that will affect this information?

Do this: Start listening to Dave Ramsey, call him. I'm running under the assumption that you are doing this by yourself, with no family assistance. Now Dave is going to tell you that credit cards are evil, and that you shouldn't go into debt period, but he has more knowledge and experience to get you where you need to be.

And go to the college financial dept. and apply for everything you can. Work for the school, anything. If it's a state university, usually if you work for the state after you graduate you get credit for your time-in-grade towards retirement.

@ninabi: Apply for another card, get approved and opt out of this silly AF nonsense.

Apply for a card like Citi Forward, it's probably got better rewards than what you have now.

[www.citiforward.com]

Get approved and ditch FIA.

@wcnghj: I don't know, this situation has got me concerned. My first credit card is one I opened when first started school - it was for students with limited credit - I finish grad school soon and I'm concerned that it's going to magically turn into a fee card, forcing me to close it and take a credit score hit.

Maybe someone can explain this to me: How exactly does closing the account hurt your credit score?

When I look at my credit report, the accounts I have closed are still there in my credit history. They are noted as paid/closed/never late. As best I can tell, the only difference between an active account and a closed one is that the closed one will drop off the report in 10 years.

BEFORE YOU CANCEL, apply for another credit card first from a credit union or a similar institution like USAA. The interest rate that your new carrier will set is largely based on your credit history so if you have real good credit and a high FICO score, you may get an interest rate like 8.9% but if the closing of your account lowers your FICO score, you may get an interest rate of 11.9%. Some may say they don't care because they don't keep a balance but you might as well get the lowest interest rate possible just in case you need to carry a balance sometime in the future. Having only one credit card makes you a hostage and FIA (part of B of A) knows this and has leverage over you. Good luck!

This happened to me. I never missed a payment, in fact I just paid off my balance that I had carried for over a year in the last two months.

Then they decided to write and tell me that they value me as a customer so much they were going to start charging me a 75.00 annual fee.

I declined the change, and posted a nice blog entry for them to read at their leisure: [munkinarts.com]

This is the CARD

This is the CARD Act in action. Thank your brilliant representatives in Congress for passing this stupid piece of legislation.

@JiminyChristmas: It really doesn't unless you have credit cards that carry a balance. Then the utilization number could go up and that number can hurt your score quite a bit. The utilization is calculated based on your balance and credit limit. It takes into account the total ratios of all credit balances and limits and also individually, so it is best to not have one card with a zero balance and one card at its limit.

I think if you close an account with a balance it really hurts your score because your utilization on that card is more than 100%. I am not sure.

@wcnghj: I am thinking he won't be able to. If he has only one card, and an account they are charging $100 for, his credit score/profile will be low enough he won't qualify.