Penalized For Not Carrying Debt?

Over at there is an article discussing a recent Senate Banking Committee hearing that is examinging credit card practices. According to the article, one consumer advocate is proposing an idea that those who pay their credit card balances in full every month should pay a small annual fee.

If you are one of the people that pays your credit card balance in full each month, you are classified as a deadbeat. At least in the eyes of the credit card company. To the credit card company, you are a deadbeat because they are only making a limited amount of money off of you because you are not paying outrageous interest or being hit with late fees and other related fees.

Credit card penalty fees has become a multi-billion dollar business, estimated to be a record $17.1 billion in collected fees for 2006 according to Senate Banking Committee Chairman Christopher Dodd (D-Conn.). With numbers like that, do the credit card companies really need to penalize people that don’t carry a balance from month to month?

Greed or Good Business?
Depending on which side of the fence you stand, the idea of charging an annual fee to those that pay off their credit card balance reeks of either greed or good business practice. While I can understand the credit card companies wanting to squeeze every last cent of profit out of their customers, I would be one of those penalized and would give serious consideration to the use of my credit cards.

It would certainly be interesting to see if there would be a backlash against the credit card companies if they were to actually impose such an annual fee. In my opinion, there are many obstacles standing in the way of this ever becoming a reality but there very well could be a day where we see this idea put into place. One big obstacle is the risk of alienating people that bring in a healthy amount of money via the fees charged to merchants for each transaction. While it likely isn’t as much as the $17 billion in credit card penalties, I have to imagine that is no small amount.

But I can tell you that if this annual fee were to become a reality, I would no longer think about living without cash. On the contrary, I would likely move towards a lifestyle without credit cards.

What do you think about this idea being proposed at the Senate Banking Committee hearing?

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