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GE to cardholders: Pay up
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September 10, 1996: 7:17 p.m. ET
Company plans to start charging annual fee to customers who pay off balances
From Correspondent Irv Chapman
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WASHINGTON (CNNfn) - Credit card holders who pay off their balances every month tend to think they're doing a good thing. But at least one credit card issuer doesn't agree.
GE Capital Corp., the General Electric subsidiary that issues GE's Rewards MasterCard, said Tuesday cardholders who don't carry a balance will start paying a $25 annual fee.
GE Capital Spokesman Neal McGarity told the Associated Press the move was being done to cover administrative costs associated with the Rewards program.
"Maintaining the GE Cash Rewards program involves significant and administrative costs" that are covered by interest income, he said. "We chose a fee in this situation instead of cutting the reward."
GE is calling the charge a maintenance fee and said it is necessary if they are going to continue giving cash rebates to users of the card.
Consumer groups weren't pleased by the news. Ruth Susswein, executive director of the Bankcard Holders of America, said she was concerned by the industry's quest to add even more credit card debt,considering Americans already owe nearly $500 billion. (200K WAV) or (200K AIFF)
GE's McGarity said some cardholders have already canceled their accounts, but the company was hopeful that there would not be many more.
Carmen Sullivan of the Federal Deposit Insurance Corp., said the number of GE cardholders that defect will depend in part on how many other issuers try the same ploy.
"The marketplace really needs to decide what the customer is willing to pay for this privilege of having a credit card. (The question) is what's going to determine whether this fee is going to be part of a new trend or not," she said.
One of the latest trends is for issuers to offer incentives and premiums to cardholders. In return, they often charge higher annual fees.
For the past 10 years, banks have rushed to hand out credit cards to everyone. Finally, Midwest financial institution Banc One surprised 100,000 cardholders who had run up small or no balances and told them their cards were being canceled.
While customers that called and complained got their accounts reopened, they said the bank's decision didn't sit well with them.
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