LowCards.com. It appears that Citigroup's test of adding an annual fee to a small share of customers in August 2009 proved to be successful for the issuer, which competes with Visa ( V), MasterCard ( MC) and Capital One ( COF). At that time, Citigroup began charging some cardholders an annual fee of $30 to $90 unless they spent at least $2,400 a year. Now a far greater number of customers are receiving this notice. "The reason we are making this change is to maintain the quality of our service amid the rising cost of doing business," said Ken Stork of Citibank in a letter to the cardholders receiving this notice. Citigroup's decision may be a sign of things to come. Issuers such as Citigroup have been squeezed weaker consumer spending, higher default rates and the enactment of the CARD Act, which puts limits on some interest-rate increases. Adding annual fees is a way to easily generate revenue. For consumers who spend at least an average of $200 a month on their Citigroup cards, the fee may not be a big deal. Those who own credit cards for emergencies will now have to pay for that safety.
Holders can always ask issuers to waive annual fees. It may not work, but it doesn't hurt to try. If consumers have a good history with the Citigroup card and it is building up their credit score, they can shift some spending to reach the $2,400 limit and pay off balances each month. Of course, you can opt out of the card, close the account and shop for a new credit card. -- Reported by Bill Hardekopf, CEO of LowCards.com.