Credit Cards with Annual Fees Will Be Widespread by End of 2010, Says Auriemma Consulting Group

LONDON — Reduced revenues will drive credit card issuers to introduce cards with annual fees to consumers in the near future, according to Auriemma Consulting Group, a management consulting firm that serves the cards and payments industry. Cards without annual fees will not feature rewards and will only offer cardholders basic benefits.

This shift away from no-fee credit cards will come as a result of the changes in the ways that consumers are using credit cards, which affects the profitability of credit card issuers. Consumers are less likely to carry balances on their credit cards, reducing the amount of revenue card issuers can earn on interest. Data published by Auriemma Consulting Group in Cardbeat® shows that the percentage of consumers carrying balances on their credit cards has decreased 40% in the past year. Additionally, the number of consumers unable to pay their bills (credit cards or otherwise) has increased dramatically over the past 18 months. Since the end of 2008, the percentage of credit card accounts written off by lenders has exceeded 10%; in 2006, the percentage of credit card accounts written off was typically between 3 and 5%. These two factors have resulted in card issuers being forced to seek out alternate commercial models and income streams.