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
Luke
July 25, 2009
I have a Shell Master Card through Citibank. I have carried a balance, but my payments are always on time. They jacked my rate as of July 1 from 9.99% to 24.99%. Now, my payment would double, and most will go to interest. This is crazy, I can't afford the increase.
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jackie
August 13, 2009
Oh well same ole story they suck, i asked to have my interest rates lowed too! they wont hear of it instead they threated to take me to court if i didnt set up a automatic payment plan i agreed because i want to get rid of them to maybe i should just give them 25 dallors on month i owe them 2 grand! any ideas oh yes i forgot to mention we lost our overtime in our family
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Glenn
August 21, 2009
We have the same story! Great Credit Never Late and Citi raised our rate to 21+%. Sure glad we have no credit card debt and thats the way its going to stay! We will never use credit cards again! I can't believe that the Credit Card Companies are so stupid that they think that the consumer is just going to roll over and take this BS. STOP USING CREDIT CARDS AND SHOW THESE CROOKS WHO'S BOSS!
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Louis
September 04, 2009
My Citibank credit card was 7.99% and they now want to reset it for 14.99% even though I have a high balance and never missed / was late with any payments for over 10 years. Aren't we entitled to file a class action against the credit card companies for ruining our FICO scores and usury? WE should unite and fight against the super elite and their ways to make the middle class carry their burden. Where did the 7 billion dollars go to? WE should make our voices heard as the super elite are former founders of companies who became politicans to scam the middle class.
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Patrick
September 27, 2009
The best way to stop this crisis is for every one to stop paying the card. They want every one to pay off balance probably to bring in more inverters. There profit report will be released on October 15 2009.
There sticking it to me to. They lowered my credit limit witch i don't mind because i shredded the card anyway. The problem is they lowered it to the balance i have on my card and raised interest to 24.99%. Iv always paid on time more then what was recommended. If your one of the few middle class people still at float don't worry about the credit card company's will finish you off.
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StephenDraper
October 07, 2009
Probably due to the recent law about cards which are quite tighter towards them. If you can use cash, then use cash to avoid these rate increase.
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I hate Citibank
October 22, 2009
You guys are lucky! I have been with Citibank for 4 years and have never paid late or gone over my limit. I just got the letter that they are going to increase my APR to 29.99% from 6.99%! Is that even legal? I am going to pay of the small balance and let them pay every month to keep my account open. No more interest money from me!
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thomas
November 10, 2009
my name is thomas and my wife and i naomi have a citibank master card, and we too received the letter stating that our interest rate is skyrocketing from 7.99% to 29.99% as of 11.12.2010. we're on a 7.99% now and we'll also join others in closing our account when it's paid off. we're not paying for that ceo to live high on the mighty on our account.
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Kathy
November 22, 2009
Somebody needs to organize a protest on the U.S.capitol steps in order to get the attention of our idiotic representatives and senators. They are clueless as to what THEIR bill has done to the average American. If our congressmen and President give 1 more dime to these arrogant banks, we should throw them all out! This is crazy!
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non loya citi holder
November 26, 2009
I was lucky enough to get a letter also. Same story, never late, pd more than minimum, or pd off monthly.
7.99 to 29.99%. Are you kidding me??? I also called and no one would work with me. I asked to be put on another card...they said i could apply online and look at the terms for the lowre intrest care....i mentioned i DID and thats why I went with them in the first place!!!
so my quetion owuld be...do i opt out and have them close my account? and pay off the balance as i intednded in Feb?
OR do i take the hit for 1 month, pay it off and leave it open and just shred the card?
-which would do more damage Citi?
Im very frustrated as I have always bragged at how wonderful this card has been....way to go Citi.
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