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Credit Card Inactivity Fees: You Pay for Not Using your Card

by Barbara Marquand

You've heard about the myriad of fees you pay to use credit cards, from annual fees for maintaining accounts to balance transfer fees for moving one credit card balance to another.

But if you're thinking about putting your credit cards away, consider this: Now some credit card companies are charging inactivity fees for not using cards.

Saying No To Credit Card Use Might Cost You

Although not widespread yet, inactivity fees, which are as high as $36 a year, are more common than a year ago, according to "Dodging Reform," a report by the Center for Responsible Lending. None of the top eight credit card issuers have added the fees, but five other issuers charge inactivity fees or "account management fees" for having a balance on a closed account. In addition, credit card companies sometimes cancel credit card accounts that remain inactive for more than a few months.

So what does this mean for you?

Opting Out Under New Credit Card Terms

• Under the CARD Act, you have the right to opt out of an account if the issuer proposes new terms, such as an interest rate hike. You'll then be able to pay off the balance on the card according to the original terms, but you won't be able to make any new transactions. Effectively the account is closed. Be aware that as a result, the card issuer might charge an "account management fee," even though you closed the account because of the proposed changes by the card issuer.

• To keep an account active, charge something small and pay it off completely each month. For instance, set up automatic bill pay for one of your monthly bills on the credit card.

How Many Credit Cards Do You Need?

• Financial experts have long preached the wisdom of maintaining only the number of credit cards you can manage responsibly, and with the growing number of fees, that advice holds up well. Most people require only two or three credit card accounts. Don't apply for more cards than you need.

With new regulations, the credit card landscape is shifting every month. Carefully read all your credit card statements and notices, and pore over the fine print when you apply for a new credit card to understand the terms and conditions.

Published 12/01/09 (Modified 03/01/11)

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