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Avoid credit card minimum-purchase fees

If you decide to keep the card, here's a hack for fulfilling the requirement and avoiding an annual fee.

By Karen Datko Feb 16, 2010 3:42PM

This post comes from Jim Wang at partner blog Bargaineering.

 

As we mentioned last year, credit card issuers are beginning to institute annual fees they are willing to refund if you make enough purchases in a year. The first issuer to start doing this was Citibank, which recently sent notices to cardholders about a $60 fee starting April 1. If cardholders spend $2,400 in a 12-month period, the fee will be waived. The Consumerist had the full text of the letter cardholders received.

 

I received an e-mail from a reader asking if I knew what she could do:

I am not sure if you have covered this topic but I got a letter in the mail from Citi cards that they are going to now charge a $60 annual fee and that fee is apparently going to be waived at the end of the year if I make at least $2,400 in a year in purchases. I have had this card for a couple years and used it once to do a balance transfer for 0%. I have a limit of $17,300 on this card. I am at a loss on what to do because I may not be able to make the $2,400 in purchases because I use my ... debit card for most of my purchases. My question is: If I were to close this account, how is that going to affect my credit? Will it? What are the factors I should consider before I close the account?

If you think Citibank is alone in this, think again. Issuers are seeing many of their former revenue streams trimmed by the Credit CARD Act and they’re trying to find alternatives. I personally prefer something straightforward like this from the card companies than something a little harder to understand. Plus it doesn’t appear everyone is receiving a similar notice; perhaps it’s just the low-activity cards. 

If you close this account, it will lower your credit score a little bit since your credit utilization will go up. But it’s better to do that than pay $60 unnecessarily.

I do have a short-term solution if you decide to keep the card but find yourself falling short of the minimum-purchase requirement: Use it to buy coins from the U.S. Mint. The U.S. Mint has a $1 Coin Direct Ship Program where you can buy up to two boxes ($500 total) of each presidential coin issue (there's no limit on the Native American designs). Shipping is free. (When you add them to your cart, it will show $4.95 for shipping but that will drop to $0 at checkout.)

 

You can use the coins for regular cash purchases or deposit them at your bank.

 

Personally, I’m all for more $1 coins entering circulation. A coin can survive 25 years, according to the U.S. Mint, and a paper bill survives less than two years. The more coins we have, the cheaper our currency will be and we all win.

 

Related reading at Bargaineering:

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