Inactivity Fees Threaten Credit Account Management

Credit card holders will soon face charges for their card whether they use it or not. This is in line with the inactivity fees that are being tried out by Fifth Third Bancorp since June.

With some plastic card issuers that face high level of delinquencies, they are trying to rework other fees just to cover the declining revenue. Today Fifth Third Bancorp is charging around 19 dollars for not using a card.

According to Stephanie Honan, the company is just trying to encourage the active use and credit account management of cards by its owners. However, a web designer from Michigan says that it is possible for credit card holders to get too many charges because of the inactivity. Since people do not think about their inactive cards, they might forget to pay the fee. Therefore, they can be faced with late fees on top of the inactivity fee.

On the other hand, Linda Sherry, Director of National Priorities of Consumer Action, said that this inactivity fee has always been used in the past. This can be waived in cases when a consumer uses a card a few times a year. Therefore, instead of keeping it in the drawer, people can use it periodically to avoid charges.

Nick Bourke, Manager of Pew Charitable Trusts, explained why a lot of Americans are not using some of their cards. He said that this is part of their credit account management strategy. They usually pay off debts in one card and not use them afterwards. They keep the cards rather than cancelling them so as to take care of their credit scores.

Bourke added that this case will be a real problem to a lot of people who try to manage their debts. If people use the card, their balance adds up. On the other hand, if they will not use it, they still have to pay a fee.

Aside from Fifth Third, some large card companies also test this kind of fees to their clients who do not use their cards enough. For example, Citigroup Incorporated gives out varying interest rates to their customers depending on the number of times they are using the cards. However, customers can get 10 percent from their total interest in cases they exceed the amount of purchase set for the month.

Though some companies are testing these fees already, other large companies such as Bank of America, Discover Financial Services, Capital One Financial Corp., and JPMorgan Chase and Co. do not have inactivity fees for their customers.

Doug Nicholas

Doug Nicholas, a financial consultant by profession with a Masters degree in International Business from Brown University, is also an ardent writer. Though he has a full time job at one of the companies listed on Wall Street, he does manage to squeeze in time to follow his passion. He puts his ideas to words in his articles related to finance and business.