I rarely use my Discover Card but charged a $2 every 4 weeks Washington Post subscription to Discover back in April. So the only thing that’s on the card each month is the $2 charge from WaPo. Then Discover gives me a $2 “small balance” credit on the statement and says my balance is $0. The transaction costs on processing a $2 payment must be more than that. So far I haven’t paid anything on the WaPo subscription.
Several years ago someone fradulently charged over $4,000 in concert tickets to my Discover. Discover immediately caught the fraud and removed the charge, but they let me keep the $80 in a “cashback” bonus.
Discover is betting on the come (i.e., that I’ll make a purchase that’s profitable for them at some time in the future.) It costs a credit card company something like $300 to $500 to sign a new customer. (The majority of the junk mail they send out goes unanswered.) No reason to cut off a customer with an 800 FICA score that pays his bill on time.
Well … maybe, maybe not. I wonder if eventually they will cut off customers that simply don’t earn them enough? For example, someone who charges 10 bucks a month and pays the bill in full on time, every time. They get less than 1% after the card processor takes their cut, so they are making 10 cents a month at best from that card. Maybe someday they do a big cull of cards based on profitability…
Charging card holders an annual fee became a thing in the 80s, when customer abuse was popular among the Dirty Capitalist Dogs . In the early 90s, I received an offer for an AT&T Universal Card, that promised “no fee for life”. To this day, my Universal Card says “charter member”. The moment I had that Universal Card in my paws, I called the Dirty Capitalist Dogs at Visa, who had been charging me an annual fee, and asked them to waive the fee. I heard the guy typing for a few moments (probably to see how much they made off me in interest over the years, which would be zero) and said “I can’t make that a no-fee card”. I said “then cancel it”.
I still have that Universal Card. Universal Card has been sold and resold by several banks. Currently, the Dirty Capitalist Dogs at Citi service the account. Citi keeps sending me entreaties to convert to a Citi card, which would not have that “no fee for life” guarantee. I toss their entreaties in the shredder.
There are tons of no fee cards out there. For example, I have a Fidelity no fee card that gives 2% back that is deposited automatically to my Fidelity brokerage account. It isn’t making me rich, but I enjoy free money appearing in my account from time to time. It is better than not getting 2%. There are other, similar no-fee rewards cards out there.
IMO, many people have misplaced sentimental attachments to credit cards they’ve had for a long time. The card doesn’t love you back, so it is okay to divorce old cards from time to time and take a new, hot young thing out for a spin. The effect on your credit report of canceling an old card and adding a new one is very close to zero.
There was no fee on that Visa card, when I first got it, in the 70s. The attitudes of the 80s enabled the Dirty Capitalist Dogs deciding to impose a fee.
Read the T&C closely. I have yet to see one that does not have a clause saying the Dirty Capitalist Dogs reserve the right to impose an annual fee if they feel like it.
I have a card from a TBTF bank that pays a nice cash rebate (not some jive “miles” or “points”), with an additional sweetener if I transfer the cash directly into my account at that same bank. There is no fee on that card, now, but there is a clause allowing them to impose a fee if they feel like it.
Clearly, the vast majority of my transactions go on the card with the cash rebate. I use the Universal Card only for on-line transactions, to keep it active. If the TBTF Dirty Capitalist Dogs start charging a fee, that widely exceeds the cash rebate, the card is gone, and the Universal card will become the primary card.