Citibank announced yesterday that it is raising the rates that approximately 20% of their credit customers pay on outstanding balances. They expect the rate increase to be on average 3%. The WSJ reported that (sub required):
""The industry has recently experienced an unprecedented market cycle with severe funding dislocation and significant consumer credit deterioration driven by the mortgage crisis and rising unemployment. In light of these unprecedented developments and others, Citi will be repricing a group of customers in our Citi-branded consumer credit-card business in the U.S. to appropriately manage these risks," said John Carey, chief administrative officer of the credit-card unit.
Citigroup's move follows a similar change by American Express Co., which is raising rates to some customers by two to three percentage points. Raising rates on customers is a delicate dance for credit-card companies. While the firms want to pull in more revenue from customers who carry a balance from month to month, they don't want to tip those customers into default because that hurts the card issuer's bottom line.
Customers can opt out of the rate increase. Those who do are permitted to use the card at the old rate until it expires."
Citibank is not alone. Last month Amex raised rates on several of its customers by 2 to 3 percentage points. Nordstrom also summarily raised rates on all of its 2 MM customers.
All of this makes you wonder though. Isn't this the exact opposite of what the TARP was supposed to accomplish? Wasn't the idea to loosen lending and lower rates?
It also makes me wonder when a smart bank is going to come along with a lower rate and take all of of the impaired banks customers. There are relatively healthy banks out there and if they have capital, which they should, they could have a field day. Raising rates in a recessionary environment when the Fed Funds Rate is close to 0% doesn't seem like a great long term business strategy.
Comments
Mark Bonner
February 19, 2009
I provide legal representation to folks whose interest rates are hiked. Mark Bonner; 127 NW 10th St.; OKC, OK 73103. (Anywhere in the nation through local counsel.) Feel free to write or send an e-mail if you are looking for financial relief. lmb@nemw.com.
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Brian L
February 22, 2009
Any of these banks including citibank who we the people bailed out because they don't know how to run there business, should not be aloud to raise it's rates on the people who bailed them out, this makes no sense and the people we voted into government office should put a stop to this , not only is it not good for the people it's not good for Home Depot or Sears , the management morons at citibank should be replaced with people who can run that business productively. We need to contact our state reps and put a stop to this nonsense!!! NOW!
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Argh
February 28, 2009
These guys just won't give up on finding news way to stick it to the little guy.
There are some new laws coming in 2010 that should provide some relief. But, with credit cards making a big percentage of their revenue on late fees ( one thing the new law cuts back on ), the owning companies will surely find a new way to make up the loss.
Pretty good blog post about how to opt out of interest rate hikes here:
Credit Card Companies Raising Rates
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Jen
March 15, 2009
I think since Citi has been given 50 million dollars and were going to buy a jet that they do not need to do what they are doing to people.I have had a Citi card for 7 years never late and they gave me 2 options one was to keep the card open and have a ridiculis interest rate or close the account so I closed it now my fico score is being ruined by the same people who helped me establish my credit What the ****?Now 2 of my other credit card companies are doing the same thing to me.After all this my fico score is ruined.Something needs to be done with these companies its unfair!!!!!!
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Pam
March 20, 2009
I have a Citibank Diamond rewards card and just noticed the interest rate was raised from 9.9 to 14.9. I never have a balance but still don't like the rate being raised without notification. I'd like to cancel it and shove it up their behinds but I guess that would impact my credit score...but I pay cash for everything, so..? Anyway, it sucks that companies are allowed to do this. It seems like anyone can do anything and to hell with the consumer.
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Elle
April 02, 2009
I was shocked when I opened my Sears creditcard bill! My interest went from 14% to 24%. I have always paid my bill ontime and have been a card holder for over 20 years. I called the creditcard company and they stated I was to late to opt out. I was unaware (my fault for not reading up on the changes. So now I have this high balance card and I am going to do my best to get rid of any part of this down right "GREEDY" "LIFE SUCKING" credit card. As I make sure to tell everyone about their unethical practices. No wories everyone has to stand before God one day!!!
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Tapped Out
April 06, 2009
The lowdown is that if you opt out, you can still pay off the credit card when it expires, and the interest rate will remain at your old rate.
What actually happens to affect your credit score is the reduction of available credit when your account is closed. When you have the opportunity to open a card with another chiseling card company, the amount of credit they give you will offset the amount on the cancelled card by the amount of new credit given. Therefore the key here is available credit against total credit to give your fica score. Really no sweat if you intend to go to paying all cash and stop using credit cards.
If everyone gets angry enough at these clowns, we can all have an effect that puts them out of business.
Imagine millions of card holders no longer making payments to them. They would have separate attorneys fees on each collection effort, with an additive effect so large that the attorneys fees alone would put them out of business.
The negative side of this kind of thing is that non payment would cause other creditors to cancel your credit lines. If paying all cash, and your finances otherwise are sound, then why worry about the negative effect.
The real effect of any credit card defaults is that the funds our governmental representatives just committed to these criminals preying on our society is that we are all going to pay for it through taxes.
What really sticks in my craw is that these criminals are getting capital from us at 2% or less and turning around and charging us 15-24% for use of our own money.
Ben Bernanke be damned.
Bring back Lincoln's greenback and Screw them all.
I want usary laws reinstated like we used to have in California, and I want it to include credit card companies. Do you hear me Senators and Congressmen.
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Citi debacle
April 16, 2009
I too read the fine print in the change of terms notice. I contacted Citi customer service before the deadline to opt out. I unfortunately have a high balance that I'm not able to pay off in full at this time, and couldn't see getting gouged by a 12% rate increase.
The kicker, even though I opted out before my billing cycle and before the opt out deadline, they increased my rate anyway. I called again to remind them I opted out, they told me 'yes, we closed the account, but weren't able to stop the increase before the billing cycle.' They assured me it would reset the next billing cycle and I would be credited.
Next billing cycle was yesterday. guess what, they increased the rate again (they didn't quite hit the right rate last cycle). This time customer service tells me it will take 2 billing cycles.
What are they going to tell me next billing cycle, it takes 3?
in the meantime my min payment has increased over $200, and climbing, even while paying early or on time.
WTF, Citi?
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Pissed off credit card user
April 16, 2009
Well - Not only has Bank of America increased (7.9 to 13.95 apprx). I noticed my citibank (who I have been a customer with for over 30 years) as increased a lot as well 15.99%. Yesterday I just received a noticed from Discover Card (9.24 to 13.64). I had another card too that when from 9.9 to 11.99 2 months ago. I ignored that didn't realize what it was - those fliers are usually always junk. My credit score is HIGH 700's. Always has been. Yes I have balances due to some unforeseen circumstances happening at once. Well I guess the money I saved for my son's college, will be paying off my credit cards - since I can get the college loan (parents plus) at 8.5% (minus .25 for them taking about directly from my savings) so for 8.25%. Though the first year, I had it down to 6.75% - which the banks aren't offering ANYTHING now stating the government isn't giving that. BS - those were the banks discounts to pull you in than screw you! But hey - even at the 8.25% - I can claim a good portion on our taxes. So in the long run better than the damn credit cards. So to hell with the credit card companies. They were making a few hundred off of me every year, now they will be making ZERO!
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Joe Blowme
April 17, 2009
If all you losers paid off your credit cards and didn't buy shit you couldn't afford, you would have nothing to complain about!!!
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