Nearly 10 Million Citi Customers Could See Rates Increase
Just in time for the holiday shopping season, Citigroup has announced that it is raising interest rates for some of its credit card accounts. Nearly 20% of Citi customers could receive a notice in their November billing statement or a letter from Citigroup saying that their rate has increased 2-3%. Citigroup says this increase is necessary to make up for losses in its global card division.
Many households are stretching to find extra money for holiday purchases. If you plan on using credit cards for your holiday shopping and you are one of the Citi customers that receives this notice, experts suggest removing that Citi card from your wallet or purse because that rate increase will just add to the cost of your purchases.
Citigroup says the rate increase is necessary to help it return to profitability in a difficult environment. Citigroup reported losses of $1.59 billion in the third quarter. The company has already cut 12,900 of its 352,000 jobs worldwide with another 9,100 expected in the next 12 months.
The Wall Street Journal reports that interest rates are being raised by an average of three percentage points, and it will apply to customers that have not had a rate increase in the last two years. This is expected to affect approximately 20% of Citigroup’s cardholders. Citigroup is one of the nation’s largest credit card issuers with 54 million active accounts.
A number of other issuers are in the same situation as CitiGroup with the same market conditions and large losses. All issuers are looking for ways to increase revenue, minimize their risk and future losses and turn things around. Consumers should not be surprised to see some other issuers making the same rate changes. However, this rate increase strategy can also backfire on issuers if rate increases sends more cardholders into default on their credit card loans.
Experts advise to pay attention to your mail and look for notices from Citi. They often come in nondescript white envelopes that are easy to miss and toss before reading. However, if you don’t respond, you are stuck with the rate increase.
If you receive notice that your account is subject to an increase, you have until January 2009 to decline the rate increase. If you decline, you can pay down the balance on the old pricing terms until the card expires. You will then have to reapply for a card or find a different issuer.
If you decline the offer, send a letter to your issuer by certified mail, and keep a copy of the letter for your records.