A recent email from Barb reminded me of something we haven’t talked about for some time.
Her husband received a call from TD advising them that their credit card would now be charged an annual fee. Apparently, that should have been the case all along, but didn’t get charged for the first two years.
Needless to say, she was a little choked and thought they should be honouring the terms that they originally signed up for. She’s right, but she’s also totally wrong.
Card issuers don’t have any morals – they have profit margins to meet. She also, mistakenly thought that her business mattered to the card issuer – it doesn’t. They have a million plus accounts and one person being mad or leaving isn’t going to register on their financial results.
Annual fees are pure profit and it’s something they wish they could charge every cardholder for an ever-increasing amount each year. It’s kind of like bank service charge in their world.
But before you tell them to stuff it, you need to stop and think. If you do, your credit score will go down, and that will impact your line of credit rate and other borrowing. It’s not hard to understand if you read the credit score chapter in the Money Tools book, because your score impacts so much of your life.
If you have one or two credit cards, first apply for another card that’s more to your liking, lower rate, better perks, lower or no annual fee. That card issuer looks at your credit report with this other card you want to cancel still in existence. Once it arrives, then call the card issuer to cancel the one you want to get rid of.
Your credit score factors in the length of time you’ve had your cards. So if you’ve had one card for 10 years, and the other for two years, the average time is six years. If you cancel the 10-year card first, the average time drops to only two and that’ll drop your score. That’s also the reason to often consider keeping your 10-year card even if you don’t want to use it anymore…it has a big positive impact on your credit score. You can cut it up so you’re not tempted to use it, but don’t call to cancel it. Now, that’s assuming it doesn’t have an annual fee. If it does, take the small credit score drop for the big savings on the annual fees!