Amy Schiffman has an extra Fifth Third Bancorp credit card to protect her from overdraft charges on her checking account. She rarely uses it for purchases and just keeps it tucked away. However, she just received a notice from her card issuer saying that the bank will be charging her for inactivity fees.
She's upset about the sudden policy changes. She also knows that the non-use fee comes with a late fee in case she fails to pay within a prescribed period of time.
Officials from Fifth Corp said that implementation of this new fee is necessary as the bank is experiencing a rise in service and operational costs. Also, this new policy is meant to encourage customers to use their credit cards more and to not just have them lying around idle.
However, analysts said that this recent surge in inactivity fees was just part of the strategies companies are trying to implement to offset rising delinquencies, which have hit record levels lately.
Consumers now are keeping an eye on their debt to preserve or improve their credit standings. The practice of people now is to pay off their balances and then stash their credit cards away for the meantime. They are not keen on disposing their cards since it would affect their debt to available credit ratio and would have a direct impact on their credit scores. However, for people who are trying to build or rebuild their credit, this new policy puts them in a precarious position. If they cancel their cards, their available credit would go down, and if they use their card their debt levels would rise.
Some big card issuers have also followed suit with enforcing penalties for non-card use. Citibank officials say the changes were necessary as payment defaults have risen substantially. Officials from this bank said that they would also be rewarding customers who use their cards frequently by giving rebates or cash-backs.
On the other hand, industry leaders such as JP Morgan Chase, Discover, and Capital One Financial Corporation have yet to impose inactivity fees.
The government has announced that they are putting a stop to this practice of companies penalizing customers who cancel their card accounts. However, card issuers can still charge fees to clients who do not use their cards, but do not cancel their accounts.
Banks have been receiving a lot of criticisms from consumer groups who feel that they are being insensitive to consumers. People are getting disillusioned with card issuers who come up with new fees on a regular basis. Banks seem to be short-sighted and not worried that they may lose customers with their tactics, so long as they rake in more profits.