Credit cards and their annual fees

[zoebartlett]

I hate credit cards, but we''ve needed to use them from time from time (rare, but it does happen when things come up). I just got a few notices in the mail stating that they''re charging annual fees now -- cards that didn''t previously do this. I know this is a sign of the times we''re now in, but I find it annoying. I''d like to close these cards, but I''ve also heard that doing so can affect one''s credit scores. Have you been faced with this and if so, what did you do? I''m assuming there are these 3 options:

1. Pay the annual fee and keep the card(s)
2. Do a balance transfer to another card (at a different company) with a smaller fee, if possible
3. Cancel the card(s) altogether

Obviously, only share if you feel comfortable. I did end up cancelling this one particular card but I''m not sure what to do with the others.

 

[cara]

I would cancel the card. Any credit ding will be small and temporary, not worth paying an annual fee IMO. There are many cards available without annual fees.

 

[zoebartlett]

Thanks Cara. That was my thought as well, and we did cancel this one particular card.

 

[pennquaker09]

I''m not a fan of canceling cards, but I can understand wanting to get rid of one that has never had a fee. I think it depends on how much credit that these cards have available. We have 3 cards, and that''s it. If we close one without opening another and our credit score(s) would take a huge hit. So, I think you have to look at it from that perspective.

The only card we have with a substantial fee is Amex.

 

[elrohwen]

I would cancel them. There are plenty of cards without fees and I think it''s worth the drop in your credit score to get rid of a card with a fee.

 

[pennquaker09]

Date: 6/8/2010 8:52:24 AM
Author: elrohwen
I would cancel them. There are plenty of cards without fees and I think it''s worth the drop in your credit score to get rid of a card with a fee.

Open another card first!!

 

[Irishgrrrl]

Zoe, I don''t know . . . I think I''d be hesitant to close the accounts because of the negative impact it would have on my credit score. I know how obnoxious it is when the credit card companies start charging annual fees/raise your interest rate/cut your credit limit/insert random acts of evilness here. But, unfortunately, I believe that the amount of available credit you have makes up a large portion of your credit score. So closing an account (especially one with a high credit limit) means that your credit score will probably take a significant hit. Of course, if you don''t plan to apply for a mortgage, car loan, etc. anytime in the near future, it might not matter if your credit score takes a bit of a dive. Or, if you''re able to open a new account with a comparable credit limit before closing the old one, that would minimize or maybe even cancel out the damage done to your credit score by closing the old account. However, credit card companies are getting much stricter when it comes to approving new accounts, so opening a new account could be challenging.

 

[NewEnglandLady]

I would cancel them without a second thought. Your payment history, previous/current debt and debt:income ratio are bigger factors for your credit score than how much credit is at your disposal. D and I have one credit card each (no fees) and high credit scores.

 

[elrohwen]

Date: 6/8/2010 10:56:01 AM
Author: NewEnglandLady
I would cancel them without a second thought. Your payment history, previous/current debt and debt:income ratio are bigger factors for your credit score than how much credit is at your disposal. D and I have one credit card each (no fees) and high credit scores.

Ditto

 

[Irishgrrrl]

Here''s an interesting article.

Excerpt: "Pay down and spread out your debt. More than a third of your FICO score depends on how much of your available credit you''re using -- your so-called credit utilization. The FICO formula likes to see big gaps between your balances (whether you pay them off each month or not) and your limits, especially on credit cards."

Zoe, like I said before, this may not be a concern if you''re not planning to apply for a loan anytime soon . . . just wanted you to be aware.

 

[janinegirly]

So I''m curious, how much does cancelling a card REALLY affect your credit score? I personally cancel cards if there is a fee or I''m not using it. I do not like the idea of multiple cards, stale credit lines. I currently have 2 credit cards and recently cancelled a 3rd. My credit score is over 800, so do not believe it was impacted. I do have a mortgage and have never missed any payment so maybe that is more relevant than # of cc''s and how recently / many were cancelled?

In any case I''m considering opening a new credit card (good airline points) but am reluctant since it has a fee which means I''m likely to eventualll cancel.

 

[pennquaker09]

Date: 6/9/2010 11:16:00 AM
Author: janinegirly
So I''m curious, how much does canceling a card REALLY affect your credit score? I personally cancel cards if there is a fee or I''m not using it. I do not like the idea of multiple cards, stale credit lines. I currently have 2 credit cards and recently canceled a 3rd. My credit score is over 800, so do not believe it was impacted. I do have a mortgage and have never missed any payment so maybe that is more relevant than # of cc''s and how recently / many were canceled?


In any case I''m considering opening a new credit card (good airline points) but am reluctant since it has a fee which means I''m likely to eventually cancel.

It depends on the entire history of the particular card. The older the card and the more history it has, the more it''s going to affect your score. Also, closing cards with higher limits is going to affect your score more than closing one with a lower limit because credit utilization is like 30% of your credit score. If you don''t carry balances, that won''t be such a mitigating factor, but if there are balances, the score is definitely going to decline.


I have to ask, are the cards you guys have older and now they all of a sudden have annual fees?

Janine, I don''t know which airline you prefer, but if you want a primarily miles based card without an annual fee, i think Discover offers one. However, I don''t personally have one. I just use AMEX for miles since we use Delta.

 

[Lynnie]

Have you tried to call the CC companies?

My first CC was a Capital One with a small annual fee (I think it was $39). Eventually, I got a Discover Card with no annual fee, so I called Cap One to cancel. When I told them I was cancelling b/c of the annual fee, they just wiped it out, and I kept the card.

This was before the whole bad economy/bank trouble saga, though, so I don''t know if they would do the same thing now, but it''s worth a shot. I''d say give them a call and see if they can wipe out the fees before you cancel altogether.

 

[zoebartlett]

Thanks everyone!

I''ve debated about whether to close off a couple of other cards but for the time being, I think I''m going to call the CC companies and see if they''re willing to work with me somehow.

Irish/Emm -- we''re not applying for a loan anytime soon, but we might in the next 5 years though.

 

[Blenheim]

I recently had my one credit card institute an annual fee. In my case, I did not want to cancel even though I don''t like the company. I''d had the card since I was 18, it has a relatively high limit (although I''m not sure how much this matters, given that I don''t carry a balance), and we''re looking at buying a house in the next 6-8 months, so I don''t want to do anything that could negatively affect my credit. I called them and they took it off, no questions asked. It''s definitely worth a shot, and I''d do it sooner rather than later. The letter I initially received from them gave me a limited amount of time to opt out of the fee.

 

[Irishgrrrl]

Date: 6/9/2010 8:25:25 PM
Author: Zoe
Thanks everyone!

I''ve debated about whether to close off a couple of other cards but for the time being, I think I''m going to call the CC companies and see if they''re willing to work with me somehow.

Irish/Emm -- we''re not applying for a loan anytime soon, but we might in the next 5 years though.

Zoe, we''re in the same boat. We''re planning to build a new house within the next three years or so, which makes me hesitant to close any of our credit card accounts. We have a few credit cards that we don''t use and I''d like to close them, but I''m not sure how long it would take our credit scores to completely recover from closing an account, so I plan to wait until after we''re in the new house. I hate that consumers are kept so in the dark about their credit score and how different things affect it! I think that''s completely unfair and it drives me nuts!

 

[Allison D.]

I would definitely try the approach of calling them first to see if you can get them to waive fees.

If that isn''t successful, though, I''d likely try to stagger the closings over several months to lessen the impact my FICO.