The media has been warning consumers for months now that the fallout from the credit card changes instituted by the Credit Card Accountability, Responsibility and Disclosure (CARD) Act  is likely to involve increased fees, and the latest news from Citigroup is further proof that the prediction is right on. This past week, a large group of Citi cardholders received letters regarding a $60 annual fee that is being added to their account effective April 1, 2010. But the new fee is avoidable - if consumers make $2,400 in purchases during the year on their card, then the annual fee will be credited back to their account.

We first wrote about a similar change back in August 2009, when Citigroup implemented a $35 annual fee on a ”test” basis to a small share of their customers, which would also be waived with annual purchases exceeding $2400. The bad news for consumers is that it must have proved to be successful program for Citigroup, because it is now being implemented to a significantly larger base of customers – and with a higher fee of $60.

According to the letter from Citi authored by Ken Stork and sent out to affected cardholders, “The reason we are making this change is to maintain the quality of our service amid the rising cost of doing business.”  The proud owner of one of Citi’s Dividend credit cards myself, I also was a lucky recipient of this news via snail mail - and I am now faced with the quandry of deciding how to proceed with my account.

What are my options? I think my first reaction is to contact Citi and try to get the fee waived. I’ve been a customer for at least five years, never had a late payment, and pay my balance in full each month. However, I may be exactly the type of customer they are trying to push away, a “deadbeat” customer (otherwise known as one that they make no money on).

So if this doesn’t work, what next? Here are some other alternatives to pursue:

• Simply cancel your card.  Close the account and shop for a new credit card. Beware though if you do this, you may be taking a hit on your credit score. However, if you’re not in the market to use your credit immediately, the dip in your credit score will eventually dissipate with time.
• Stay with the card but shift spending. If this is one of your primary cards and it is building your credit score, shift some additional (necessary) spending to this card to reach the $2,400 limit and pay it off each month.
• Transfer your balance to an existing card. Do this with caution though,  you may get hit with a balance transfer charge of 3-5% of the balance, which is likely significantly more than the annual fee. Another point of caution: there is nothing preventing the account to which you’ve transferred your balance from imposing an annual fee later.

Unfortunately, the coming months will likely see annual and other fees added to many more popular credit cards. As consumers, it is more important than ever to read the correspondence provided by the credit card companies, and to understand how it affects your bottom line.

Have you been affected by changes to your annual credit card fees? Share your feelings about this new trend by leaving a comment! 

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