Citibank and Other Credit Card Companies Raising Interest Rates

Citibank announced yesterday that it was raising rates on about 20% of its credit card customers. Other credit card companies are doing the same and cutting credit limits.

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.

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Reviews

 
  • DDK

    September 18, 2010

    It should be a law that any new increase in interest rates is not applied to previous balance but only new charges. When you charge something your under the expectation that you will be pay it off at the rate at that time.

    Waiting until someone has a large balance then jacking up the rate IS BAIT AND SWITCH and card companys should not be able to get away with it.

  • StupidOne

    September 15, 2010

    More Citibank news (not about credit cards though)

    Did anyone else receive the mailing a few weeks ago that stated that starting November 1, 2010, a customer must have a minimum of $6,000 across all Citibank accounts to avoid being assessed a $20 monthly fee. I have a Ultimate Online Savings account with Citi. I threatened to close my account. Hear this, I was told since I have a stand alone account, it does not apply to me. If I opened an additional Citi account, it would be applicable. WTF? Why would a bank discourage additional business in this account?

  • Tom W

    August 19, 2010

    Everything that is described above happened to me too. I closed my account and my credit score dropped substantially. What can I do to get it up or get that off. I have never.....ever defaulted on any loan or payment ...ever and this is the thanks I get. I am having problems getting a mortgage loan because of this. Is there any recourse? Can I call Citi and get them to take the mark off my credit. Should I write my senator? Is there a class action law suit?

  • Tom

    August 14, 2010

    I called home depot today to find out why my payment had gone up by 45$ a month when I had made no new charges. The lady told me that it was because they are now charging me 2% of what I owe for minimum payment but if I wanted to opt out I could. So I said yes I wanted to opt out. She then told me that my account had been closed!!!!I said I did not want my account closed ...she put me on hold then came back and said I am sam sorry its closed there is nothing I can do! I did not give her permision to do that!!!She hurt my credit score by closing my account! They are charging me 26.99% interest and they close my account!! HOME DEPOT BITES!

  • Mary

    February 12, 2010

    I have used Citibank for 23 years. I've had balances and paid them off.I've always paid on time and even paid extra when I could. Our balance on the card was high at this time but not any where near my limit. They raised me from 13% to 29%, which upped my monthly payment. I called them and told them that I could not make that payment at this time but I was offering to pay my normal payment I was making before, due to taking a pay cut and my work hours were cut. I told them that It would only be temporary until I get my hours back and I was also looking to work a second job. They told me they were sympathetic to my situation but they could not help me right now. So 23 years with Citibank has now ended, as I closed my account with them. But they also told me that now my account will not be protected by them either. I am selling my house and I will be paying them off soon. I will never do business with them again.

  • bill

    February 02, 2010

    this is just highway robbery to the american taxpayer.i have used credit cards to help me in business.i owe out a good amount of cash myself.not that i abused the privilege,the last 3 years have really been tough on small business.i have never been late a payment at all,i always pay more than the minimun.but this is corruption,in its highest form.those bas .get bailed out with our money,and this is the thanks we get.i made my mind up.over 1/2 of my home is already paid for,so im going to roll my money,into my mortgage,at 3.5 percent.refinance,and never use their cards again.beleive me,millions of people will do this,and do they realize how much business they will lose?many people will now use debit,instead of credit cards.the effect will be felt in the long run.they ship our jobs over seas.so why cant we do business with foreign banks?wait until members of congress want to be re elected.hope they remember this,sign a petition agaist this online to congress.more people are doing just that.remember we can do something about it,if we stick together.so everyone hop on board,and sign the petition online against banks doing this,against the taxpayer who bailed them out.remember united we stand.there is more of us than them.dont give up the fight.im old school,and im not changing.sign on and we will get our message through.we changed the seat in massachuttes,and we are not stopping.not many people in washington thought brown had a chance,but he heard the people.we need more like him.theres a will,theres always a way.these big banks forget,what goes around comes around.and i do beleive in kama.bill

  • stbear007

    January 29, 2010

    Yep, stellar credit...never late. Also, one of the higher interest cards I have but use often since I have a high credit usage(as a platinum member). I used often for building houses for the perks of auto purchases. Obviously not worth it now that I will be at 19.99% whereas my other cards are at 6.75% (MBNA Platinum). Sorry but I am not at fault for the losses and HIGH CEO rates paid to keep this card any longer. Think TWICE CITI as you will see a lot more customers leaving and/or defaulting/bankruptcy. See Ya Citi...it was nice ride even though rates were higher than should be.
    Sean Thibert

  • david saenz

    January 27, 2010

    CITI BANK, ALSO HAS HOME DEPOT, AT&T, THEY SAID THEY SENT ME A LETTER ON THE INTEREST RATE RAP -OFF AT&T NEVER SENT NOTHING, I CALL EVERY MONTH TO OPT-OUT. THEY SAID I DIDN'T HAS THAT OPTION, JUST THIS MONTH THEY RAP ME A 28.99, BUT IF YOU THINK ABOUT. IF EVERYONE OPT-OUT AT THE LOW INT. RATE, THEY WOULDN'T GET THAT CASH FLOW THERE LOOKING FOR, THAT WHY THERE F ---- EVERYONE ITS ALL A BIG RAP OFF. I CAN'T BELIVE OBAMAN IS LETING THEM GET AWAY WITH THIS, IF WE COULD GET ABOUT 500.000 CARD HOLDER TO NOT PAY UNTIL THEY LOW THE RATE, I THINK WE WOULD BREAK CITI , OR BOY-CUT HOME DEPOT OR ALL CITI BUSINESS

  • Ken Johnson

    January 15, 2010

    In November, Citicard notified me that my APR would be raised to 29.99% on any remaining balance after 11-30-2009. I was given the opportunity to "Opt Out", meaning that my APR would remain the same, but I would be unable to use the card and my account would be closed. I chose to "Opt Out" on both my accounts (Citicard and AT&T Universal Card) to avoid the higher interest rate.

    I reviewed my December bill and found that my APR
    was raised to 29.99%. I contacted customer service,
    and they said that they had no record of my choosing to "Opt Out".

    I believe this is just another attempt at a big business bailed out by the government to gouge
    customers that have no voice or avenues to pursue to make them keep to the contract they offered.

    I hope someone will hold them accountable and make them refund all the customers they have defrauded.

    I read the December 3, 2007 Senate Credit Card Hearing to Focus on Unfair Interest Rate paper, where Senator Levin and other senators were able to bring credit card companies to task for unfair increases in customer's interest rates. Hopefully this will happen again.

    WRITE YOUR POLITICIANS NOW!

  • Citi Sucks

    January 05, 2010

    You can call the phone number on the back of you card. Not sure of the cutt off date tho cuz it might be different for different customers, mine is today Jan 4, 2010. Hope this helps.

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