Card account closed? You still may be charged some fees

If you carry a balance on a closed card, expect to keep paying maintenance fees

By Erica Sandberg

Opening Credits

Erica Sandberg is a prominent personal finance authority and author of "Expecting Money: The Essential Financial Plan for New and Growing Families." She writes "Opening Credits," a weekly reader Q&A column about issues for people who are new to credit, for CreditCards.com. Ask a question. 'Opening Credits' stories

Dear Opening Credits,
Hello. I have a couple of credit card accounts that the banks closed themselves. I am currently still paying off the balances, but no credit is available to me. The company is still charging me a monthly "maintenance" fee to each account. Is this legal, given that these are no longer active? -- Monique 

And then I calmed down as the rationale soon became clear. Though the credit issuers did suspend your ability to charge -- effectively shutting the cards down -- the accounts are still active because you have a balance due.

But let's back up and review why they're applying this type of fee in the first place. As you're probably aware, credit card issuers can tack on a number of service charges. The various fees may include:

• Annual fee -- just to own the card.
• Balance transfer fee -- to shift money from one account to another.
• Cash advance fee -- to withdraw cash against a credit line.
• Late fee -- for not paying on time.
• Over-limit fee -- for exceeding your credit line.
• Reward redemption fee -- typically for cashing out airline miles.
• Paper statement fee -- for recieving statements in the mail rather than online.

And then there's that maintenance fee, which goes toward the processing and billing aspect of your account. So think about that for a moment: The company is still providing you with bills, and the money you send must be processed, right? That's why they are still assessing the fee -- to cover those expenses. And yes, it's legal.

Now, not all credit cards charge for maintenance. In fact, it's always best to get an account that has a short list of fees. However, if your credit is bad or not yet established, you probably won't qualify for such premium cards.

My guess is that your credit was and is not so hot. Why would I come to this conclusion? Because several of your current card companies have pulled the plug on your charging rights. A poor payment history and/or balances that are too high in relation to your charging limit are likely reasons. You became too great of a risk to keep on as a customer.

Thankfully, with credit, you can turn a negative situation into a positive one fairly easily. For example, you can try to get that maintenance fee removed with a simple phone call. Just ask, they may say yes. And as you can see from the list of fees, you may be getting charged for paper statements. If you get them in the mail, ask if online billing is available, even with the account being closed.

You said that you're paying off what you owe, which will also work in your favor. Once those balances are well below the charging limits, your credit rating should improve. At that point, it would be wise to build your credit back up further: Apply for a credit card with as few fees as possible (they'll be on the application, so read it carefully), then charge what you need and pay off the balance in full by the due date.

I don't know about you, Monique, but for me this was a good lesson in tempering quick ire. What at first may appear wrong is often right, if you look a little deeper.

See related: Maintenance fees not regulated by CARD Act, Issuers push for paper billing, Credit card balance transfers: Find the best deal 

Erica Sandberg's articles and insight are featured in such publications as the Wall Street Journal, Pregnancy, Babytalk, Redbook, Bank Investment Consultant, Prosper.com, MSNMoney.com, and Smartmoney.com. An active television and radio commentator, Erica is the credit and money management expert for San Francisco’s KRON-TV, a frequent guest on Forbes Video Network, Fox Business News, Businessweek-TV, and all Bay Area networks. Prior to launching her own reporting and consulting business, she was affiliated with Consumer Credit Counseling Services of San Francisco where she counseled individuals, conducted educational workshops, and led the media relations department. Erica is a member of the Society of American Business Editors and Writers, and on the advisory committee for Project Money.

Send your question to Erica.

Published: March 9, 2011

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