Citibank to Charge $60.00 Annual Fee to Credit Card Holders

Posted by on Feb 19th, 2010

Citibank (NYSE: C) has announced that they will be charging many of their credit card holders a new $60.00 annual fee effective April 1st, 2010.

The company’s profits and revenue have been eroding as the company sells off portions of its business to pay off its debt to the federal government and faces increasing losses from loans that have gone bad. Citibank is now looking for ways to boost their revenue and cash flow and have rolled out a number of new fees.

One of the most visible new fees is the $60 annual fee being slapped on credit card holders effective in April. If the customer spends more than $2,400 per year on the card, the annual fee will be waived.

Citigroup started charging adding fees to certain credit cards that were previously fee-free last November as a test-run to gage consumer reaction. The announcement of a new $60 annual fee leads analysts to believe that the initial test runs were successfully enough for the company to expand the program.

Citibank’s credit card business, like Wells Fargo’s, Bank of America’s and Chase’s, has come under pressures as consumers are paying off credit card debt en masse, borrowing less money, and regulations are limiting the amount of money that can be charged on late fees interest. What was once a major revenue stream has slowed down to a mere trickle. Citi and other banks are now scrambling to make up for lost profits.

There’s no telling how many borrowers will end up cancelling their credit cards, but the number must have been small enough to warrant an expansion of the program.

Since the Credit CARD act was passed by congress, it became clear to credit card companies that they would have to find new ways to increase fees. One of the fees that many of the banks are looking to tack-on is a fee for low-volume users so that those accounts are as profitable as heavier spenders. Analysts believe that Citigroup may return its credit card division to profitability in a big way if it can get low-volume payers to cough up anywhere from $30 to $90 per year for an account.

Because of the scope of regulation from the Credit CARD act and consumers declining demand to borrow money on credit cards, it’s likely that Citigroup and others won’t be able to make up the huge fees they were making in 2006 and 2007, but that won’t stop them from trying.

Will you be cancelling your Citibank credit card? Let us know in the comments section below.