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Letter from Citibank


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#1 of 24 SethH

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Posted February 15 2010 - 09:32 AM

I have had a credit card with Citi for about 10 years now.  It is my longest open credit account and I keep the card around just for that reason. 

Today I received a letter stating that "effective April 1, 2010, an annual fee of $60 is being added" to the card.  This fee is "refundable" at the end of each year if I spend at least $2400 on the card during the year.

From what I've seen online LOTS of people are getting this letter.  It seems to apply to 8-10 of their cards.  Mine, for reference, is the Diamond Preferred Rewards card.

The back of the letter addresses my right to "opt-out" of this fee by closing my account.  My concern, naturally, is that closing this account will likely hurt my credit score by reducing my available credit and by closing my oldest open account.

So, I'm here to ask for the collective wisdom of the HTF . . . what should I do?  Do I close my account?  Will it, in fact, hurt my credit?  If so, how much?  Does anyone know if Citi has other cards that will not have this new annual fee imposed that they might be willing to switch my account over to?

A little more background:  I don't think it makes sense to pay the fee.  I really don't use this card and will not spend $2400 on the card in any normal year.  I have a BP Rewards card from Chase that I received a letter about stating they will not be adding an annual fee, and I use that card more anyway, so I plan to stick with that for most of my credit spending.


#2 of 24 Steve_Pannell

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Posted February 15 2010 - 09:47 AM

I'm not going to tell you what you should do but I'll tell you what I would do (and actually have already done).

I don't have any Citi cards but it really doesn't  make any difference. I got a letter from my credit card issuer informing me that they were raising my interest rate (because I was such a valued customer, I guess). It took me about 2 seconds to decide what to do. I called them, opted out and closed the accounts. I refuse to do business with a company that abuses me in any way when I've done nothing to deserve it. If I had missed payments, been late or something I would understand but this kind of treatment is uncalled for and I don't have to take it.

I only use a debit card now and have no plans to ever get another credit card.


#3 of 24 Justin Lane

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Posted February 15 2010 - 02:12 PM

I did not get hit with the annual fee on my one Chase card, but I did get an offer to convert my card into a new flavor of rewards card. When I read the fine print, this conversion would have lead to an annual fee of $40 for the improved points program which almost looked the same as the old free program.

I also have an American Express card. They have been decent when it comes to interest rates points.

The credit card companies are thieves and with these changes, I have been changing my habits more and more towards cash even though I typically don't carry balances.

If they charged the interest rates they are doing today a few hundred years ago, the lender would have been tarred and feathered and drug out in the public square.

#4 of 24 Michael Reuben

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Posted February 15 2010 - 02:35 PM



Quote:
Originally Posted by SethH 

A little more background:  I don't think it makes sense to pay the fee.  I really don't use this card and will not spend $2400 on the card in any normal year.  I have a BP Rewards card from Chase that I received a letter about stating they will not be adding an annual fee, and I use that card more anyway, so I plan to stick with that for most of my credit spending.
 
That's probably why you're getting hit with the fee. Where banks once practically threw credit cards at people, now they're reluctant to issue them unless their projections show they'll make money from every single card.

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#5 of 24 DaveF

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Posted February 15 2010 - 02:59 PM

Should I get an annual fee from Discover -- my card I've had for 16 years but rarely use now -- I would close the account. It's not worth $30 - $60/yr to buy a good credit score.

But that's me. I can't speak for anyone else's financial situation.


#6 of 24 LewB

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Posted February 15 2010 - 11:54 PM

I (and a buncha others I know) just received an interest increase letter for the credit cards we hold at the local credit union.  My guess regarding the interest and fee increases is that the credit card companies are prepping for the new regulations that are due to take effect (not sure when).
I am a proud credit card 'deadbeat', I hold only no fee cards that have some sort of reward points associated with them and I pay off my balance at the end of the month. I also apply for store CCs when that store is offering a no interest plan on an item I want.   Last time I checked my FICO, it was excellent.  I'm sure there are bonuses due to that but I will not be held hostage to that either.  I will not hesitate to cancel any card that charges me a fee.  The CC companies take a few pennies from each dollar spent, I really hate the idea of giving them anything else.
I realize that I'm lucky in that I have the means to be able to pick and choose in this way.  The ONLY way you can send a company a message that you don't like what they are doing is to vote with your $.  It's the only language they understand.


#7 of 24 Johnny Angell

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Posted February 16 2010 - 12:20 AM

I would first call the CC company and say you want to keep the card but you are not willing to pay to fee.  Tell them, politely, that you can't justify paying the fee and will have to close the account if they won't waive it.  If they refuse, I think Lew has the correct course of action.

There was a day when merchants tried to compete by offering the best product.  Now it's all about gouging the consumer for every last cent.  Gotta pay those bonuses.  It says a lot that the consumer that pays off his balance in full each month and incurs no interest charges is considered a "deadbeat".  I think there is something inherently unethical about a product whose bottom line is dependent on taking advantage of the customer.

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#8 of 24 ThomasC

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Posted February 16 2010 - 01:10 AM

I think it will hurt your credit score in the short run, but it should go back up in time. If you're not planning to get a loan within the next year or so, I don't think you need to worry about it.

#9 of 24 Jay H

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Posted February 16 2010 - 01:23 AM

Have to be careful these days too. Half the letters I get from any credit card, I typically rip up and burn (in my wood stove) but I keep wondering if I'm accidentally ripping up these fee notices cause you know, if you do nothing, then you get blindsided when you see some kind of annual fee or so suddenly on your account... 

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#10 of 24 WillG

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Posted February 16 2010 - 02:23 AM

If you're concerned about cancelling the card, just start using it for your everyday purchases: groceries, gas, medicines etc. You could even pay other bills using your credit card. Just makes sure you pay your balances in full every month and you should burn through $2,400 within months and reap reward points as well.
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#11 of 24 Nathan_F

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Posted February 16 2010 - 09:51 AM

I've heard the best way to prevent adverse credit scoring when canceling a card is to ask that the credit card company report it as "canceled by user."  The reason scores tend to drop when cards are canceled is because the scoring companies don't know who dropped whom.  You might need to follow up with the reporting/scoring agencies to ensure it was reported that way.  I read this in an article, but can't find it right now...  I'll try to find the link.


#12 of 24 drobbins

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Posted February 16 2010 - 10:00 AM

Here is my solution:

www.hometheaterforum.com/forum/thread/294519/your-credit-score-what-will-you-do#post_3625695


#13 of 24 Adam Lenhardt

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Posted February 18 2010 - 03:43 PM

Look at your last credit report (or get a new one free through the FTC program if you haven't already) and check for two things: How much is the line of credit for, and how old is the next oldest open line of credit? These are the two variables that will have the most impact on your credit. The larger the line of credit, the bigger the contraction if you cancel. Part of why traditional American Express cards don't help your credit much is because they have no set spending limit; the credit reporting agencies use your largest monthly balance in lieu of a spending limit. And if your next oldest line of credit is nearly as old as the card in question, the age won't be a major factor. What lenders look at is the average account age; high average acount age is only important because it demonstrates stability to lenders. If one account is dramatically older than the rest, than it has a disproportionate impact on the average compared to accounts that all roughly date from the same period. For instance, my student loans are my oldest line of credit and they are years older than my average account age. And even as I eagerly pay more than the minimum each month to rid myself of the bill as soon as possible, I worry about what happens to my credit once they're all finally paid off.

I think at the end of the day your debt to credit ratio is far more important, anyway. The more credit you have, and the less debt you owe, the better your credit score will be. Late payments and especially collections on your report will have a far more negative effect on your credit than cancelling one credit card will have.


#14 of 24 SethH

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Posted February 19 2010 - 09:54 AM

Thanks for your feedback, Adam.  I am almost certain I will be closing this account.  I am considering calling one of my other card companies to request an increase in my credit limit to keep my credit-to-debt ratio close to where it is today.


#15 of 24 Randy Tennison

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Posted February 20 2010 - 12:19 PM

I no longer worry about my credit score.  I closed all my accounts except for my house, and still have a score in the 800's. 

Your fico score is simply a representation of your ability to go into debt.  It doesn't say anything about how well you handle money, or how honest you are, or if you are a good person.  It says nothing about your social status, your income, or your integrity.  A good Fico score simply says that you have borrowed money and paid it back.  That's it.  

As Dave Ramsey says, it's time to stop worshiping at the feet of the almighty Fico.  Don't believe the hype.  Get out of debt.  It's one of the most freeing things you can do.
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#16 of 24 Eric_L

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Posted February 20 2010 - 12:24 PM

I'll tell you my funny - I work for a well known company which issues credit cards.   I have a card from that company with a substantial limit which I use for daily shopping.  I accumulate over $1000 worth of points every year - effectively getting Christmas for free.

Recently I hired a person who will be helping me with marketing and operations.   She will need to spend money on office supplies, business lunches, and special events.   I thought it would be helpful to get a low-limit ($200-$500) business card for myself and one to give her for these and other expenses.   My own company turned me down!   They said only one card per customer.   I explained that I want to seperate my business and personal expenses, and that there was no way I would put employees on my (very high limit) family card...  They still said no.

I escalated it to higher levels in that department, and was given the same answer, so I crafted a letter to senior management and asked them what company's credit card they would suggest I use for paying for lunch when I take our top clients out...  Haven't heard back yet... :)


#17 of 24 Chris Lockwood

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Posted February 21 2010 - 09:51 AM



Quote:
Originally Posted by Eric_L 

Recently I hired a person who will be helping me with marketing and operations.   She will need to spend money on office supplies, business lunches, and special events.   I thought it would be helpful to get a low-limit ($200-$500) business card for myself and one to give her for these and other expenses.   My own company turned me down!   They said only one card per customer.   I explained that I want to seperate my business and personal expenses, and that there was no way I would put employees on my (very high limit) family card...  They still said no.

 

That's weird- I keep getting offers for business credit cards from companies I already have an account with, so clearly it's not against their rules. Plus it's not unusual for someone to have more than one Visa or Mastercard, from different issuers.



#18 of 24 Scott Merryfield

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Posted February 22 2010 - 07:31 AM

My wife received a similar letter from Citi for one of her cards, Seth. In our case, there was no hesitation -- we canceled the card. We carry only no-fee cards, and pay off the balance every month. I get the occasional "intererst rate increase" notice, but those do not bother me since we do not carry a balance.

Oddly, I did not receive any annual fee notice on my Citi MasterCard, but I use it to pay for almost everything. However, if I get such a notice, the card will be canceled immediately.


#19 of 24 SethH

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Posted February 25 2010 - 01:10 PM

 I called tonight to cancel my card.  I asked if they would waive the fee . . . nope.  I asked if they would transfer my account to a card without an annual fee . . . nope.  What I found most interesting is that they put up no fight to me closing my account.  She kindly offered to open a new account for me on a card without an annual account.  I politely declined saying I had no desire to open a new account.  She then closed my account.  The entire exchange was less than 3 minutes.  I had myself geared up to deal with a hard sell being put on me . . .oh well, I guess my business isn't valuable to them . . . how dare I never carry a balance and pay interest :-)


#20 of 24 Bob_S.

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Posted March 23 2010 - 02:39 PM

Why WOULD they like someone who never has a balance? They can't make money off of someone like you. You think they give out credit cards for charity? They send you a credit card in hopes that you are financial irresponsible and rack up enough debt so every month you only pay the minimum payment. If you owned a credit card business, wouldn't YOU want people to carry balances? Now I applaud everyone of you who pay off your balances each month. I do the same except for this past year, I got slammed with car repairs for both of our cars which amounted to over $4,000.00 dollars. I had no choice but to put it on a credit card, but as soon as I got my tax refund, I paid it off.




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