Money Morning

to me

show details 8:05 AM (9 hours ago)



Images are not displayed.
Display images below



Money Morning Logo

Happy Saturday,

Millions of Citibank credit card holders are in for a rude pre-holiday shock.

The bank is more than doubling consumer credit card interest rates for
many card holders just before they head out to do their holiday
shopping. And raising them significantly for others.
Talk about the Grinch who stole Christmas.

Let's do some math. The company has soaked taxpayers with a $326 billion bailout
($306 billion in Treasury and FDIC guarantees, plus a $20 billion
investment from the Troubled Asset Relief Program) caused not by
us...but by their mismanagement. Now, they're apparently going to
stick it to us again by more than doubling interest rates. Talk about
bad business practices.

Citi is asking for a bailout as a result of their poor decisions.
Neither my wife nor I have made any. In fact, we've been perfect, loyal
customers. I've held a Citi card since the early 1980s. I've paid my
bills on time, never missed a payment, and the bank has never had to
initiate collection actions against me...and now my credit card rate
has been increased 49.91% from 9.999% to 14.99%?

And I'm one of the lucky ones. It's worse for some people...much worse.
For instance, Jim Gosnell who runs a contracting business told the Atlanta Journal Constitution recently that his interest rate has jumped to 36.33%.

I called Citi for their comment. They told me that the mortgage crisis
and higher unemployment rates are causing the increases. The rep I
spoke with unofficially noted off the record that this is just like the
airlines (with regard to the nickel and diming that's going on).

Citibank Public Affairs VP, Samuel Wang, had this to say to television
station KATU in response to similar questions on the matter: "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 US to appropriate managed these risks."

"Repricing" is corporate credit card double-speak for the ability to
hike account interest rates seemingly at will and not just on new
charges. That's something that's frustrated both consumers and
regulators alike. The banks and credit card companies write their
contracts in such a way that they can apply new rates not just on
future charges, but on pre-existing balances retroactively. And
anything from a missed payment on another loan, a credit score drop or
even actions taken by another lender entirely can trigger the change.

That leaves customers like Monica Johnson in the lurch. She told the
AJC that when her credit score worsened, her credit card companies
decreased her limits and raised her interest rates to the point she
can't make the minimum payments.

So not only are you potentially going to have to pay a whole lot more
on the money you spend, but you're potentially going to have a lot less
of it headed into the holiday season.

Banks say their practices are fair and needed to control risk in this increasingly risky environment. On the heels of a billion-dollar bailout,
that seems like a disingenuous cop-out, to say the least. Yes consumers
spent big in the last few years, but the credit card companies and
banks spent bigger, engaged in predatory lending, and nearly
single-handedly drove the rest of the world to the brink of financial
oblivion with their fancy pants derivatives vehicles...making bets they
not only didn't fully understand, but that they didn't have to make in
the first place. And which the majority of consumers had no part of.

Customers at the most risk for the latest round of banking mayhem
include those with high balances and credit lines, late payments, low
credit scores and those who owe more than 30% of their credit limit.

The last thing you want right now is to wake up after the holidays and
find out that you are not only over your (previous) credit limit, but
in the position of having to pay more than double to bail yourself out.

5 Steps To Take Today:
1 - Open your bank-related mail to see if you are affected by higher rates.
2 - Look online at your statement to see that your credit line remains what you think it is.
3 - Check your credit score more frequently.
4 - Opt out of this madness and use cash entirely to keep your balance below 30%.
5 - Switch to another more reasonable credit card company.

Speaking of which, now I've got to call American Express. They've just
sent my 6-year-old son a "pre-approved" sign up for the American
Express Rewards Plus Gold Card with no annual fee for the first year....