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
Angry in Minnesota
April 21, 2009
We just had Sears do the same they were very rude when we asked why. They told us either except the change or dont use the card. Well guess what Sears we wont be shopping at your store any time soon. This is highway robbery and something needs to be done soon. We have always paid on time and more then the minimum payment.
Wells Fargo Bank also dropped our limit on our Home equity Line and the Vakue of our hole dropped 12,000.
What stimuless package???
When will it end????
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Linda
April 22, 2009
Citibank raised my interest rates on a closed account! Can they do this?
Sears closed my account in 2003 because of a negative mark on my credit report. I had absolutely NO credit line with them anymore, and I was to pay the card off. Suddenly this month I noticed my interest rate doubled, and I have a Total Credit Line amount, and a Cash Access Line amount??? Looking closer, I noticed they've been slowly going up on my interest rate for 5 years!
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Susie
April 24, 2009
I agree with Joe we need to live within our means and STOP USING CREDIT CARDS! This would cure the problem quickly. What would these "poor" companies do if everyone just stopped using credit cards?? They would soon be out of business!! We can put a stop to these companies and its really pretty simple. Live within our means and stop using those****credit cards!! WE CAN DO IT!!
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realitycheck
May 05, 2009
I agree with Joe too. Reading these comments was a real eye opener as to how bad American culture has degraded. It isn't enough that you guys run up debt and create inflation and ultimately bailouts which the rest of us normal people pay for. No, then you are going to complain because someone cut off your supply of easy credit. Here's a crazy idea: stop buying crap you don't need, start living within your means, and start taking personal responsibility for your situation. I know it is a tough message, but until you grasp it you'll remain a debt slave peasant no matter how much shiney crap you "own".
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King
June 20, 2009
Wow some of you are really blaming the consumer? Wake the fuck up. Some people have to use credit cards to help pay back school loans. College is not affordable for everybody not to mention car rentals, hotels etc all require a credit card. Next thing you know you have accumulated debt. So everybody on here pays cash for everything? Yeah sure.
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Me too
July 19, 2009
Just happened to me today, got the notice that my rate was going WWAAAYYYY up, and all of it, too. Well, I'm gonna pay off that card and leave it unused except for the monthly charges that go in for my Internet provider - which will be paid off each month, I can tell you that.
I havae been with Citi since 1983, and the only late payments were 20 years ago when I was divorced. So Citi won't be getting my bucks; I have an offer from Pen Fed at 2.9% for the life of the loan so Citi can go frog themselves.
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Marie
July 20, 2009
Same thing happened with Target Visa Card! I have calledthe company several times and they provide me with no reasonable reason why! This is so absurd. They are ripping me off and there is nothing I can do about it! I will no longer patronage Target stores. I would suggerst others do the same!
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Mike Canada
July 21, 2009
Crooks, raised mine from 9.9 to 29.9%. Nineteen year customer, make over $250K per year, never late, sterling credit and no default mortgage. I am cutting them up and moving out of the country. This wa a scam and we only have our fearless leaders in Congrss to blame. FIRE THEM ALL AT THE NEXT ELCETION! Lastly, Obama, born in Kenya not in the USA, needs to be a one termer. HIS LAME IDEAS WILL ONLY MAKE THIS SITUATION WORSE.
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Susan
July 21, 2009
I just called and told Citi to shove it, member since 2001, they lost my business! Raised me from 8.99 to 14.99. Never been late, pay more than is due. The heck with em!
Thanks congress! Many of you in congress really need to be replaced with someone that is in touch with reality!
Lets shove this bill through and give the credit card companies a year before implementation. Oh that worked!
Write your senators and congressmen, at least they will hear loud and clear voices!
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Just Me
July 22, 2009
I didn't have the rate hike when this went in to effect, so guess I lucked out there. I have been a customer of Citibank for over 15 years and held my account in good standing. I pay my payments when due, pay more than the minimum most months and have never had any problems. Until I paid my payment two days late, by my own error. My rate went from 12.9 to 25.9. I understand I paid it late.. but one time in 15+ years and no one will work with me. Because of this increase, I cannot afford my minimum payment. So there it is Citibank. You sure know how to treat your loyal customers.
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