Citigroup holds its customers hostage
Filed under: Credit Cards
Across the nation, Citibank credit card holders are receiving what pretty much amounts to a ransom note: We're going to raise your rates, says the letter, in so many words, but if you spend more money, we won't.In more specific terms, customers are being asked to spend a minimum of $750 on their cards, and if they do, they can get a rebate for 50% to 100% of their interest rate for that given month.
I can't blame anyone for wanting to implode on the spot. After all, credit cards as a group used to encourage everyone to spend, until the recession came around, when the message seemed to be -- please don't spend, and if you spend, don't spend much. But now the credit cards are encouraging spending.
And if you don't, they'll raise your rates.
Madness.
But there's a reason behind it. Ben Woolsey, director of consumer research for CreditCards.com, told the Huffington Post that Citigroup, which is Citibank's parent company, by convincing people to spend more, will cause there to be more interchange fees -- those are the fees merchants have to pay every time a customer uses a credit or debit card. And so Citigroup will make more money through interchange fees, or through the higher interest rates.
But wait, it gets better.
Yesterday, about the time Citigroup was sending out these letters, the Government Accountability Office released a report criticizing credit card companies and banks for propping up interchange fees. The report, which can be seen here, basically says that there's a monopoly on these interchange fees, noting that "Producers with market power -- such as monopolists or those offering goods not generally offered by others -- have the ability to charge high, noncompetitive prices."
So let's recap, shall we? Citigroup is asking people to spend more money, which could put them deeper into debt, if they don't manage to pay off that money within those 30 days. But if they don't spend more money because they don't want to risk going deeper into debt, Citigroup will put their consumers into more debt by raising the interest rates.
Meanwhile, Citigroup -- and other credit card companies -- are foisting artificially high interchange fees on merchants, which forces retailers to raise prices on everything, which translates into more people struggling even more to make ends meet.
It's as if the credit cards want to bankrupt everyone, but they don't, of course, because that would mean they'd lose a lot of money and have no credit card customers left. My head hurts.
Reader Comments (Page 1 of 1)
11-21-2009 @ 2:15AM
wdmurphy said...
NO surprises here that I can see. Citi is the worse company I have ever dealt with and I'm glad I will never have anymore dealings with them. I personaly hope they fail as they are a group of thieves. This country would be a lot better off without them even if it means losing all the money the government has poured into them.
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11-21-2009 @ 2:21AM
Mike Watson said...
Agreed I have nothing good to say about Citi, they are a shadow of their former self.
http://www.whatshottoday.com
11-21-2009 @ 12:12PM
DanBar said...
Citibank tried to screw me last year by jacking up my rates, i responded by writing a polite, but terse confidential letter directly to Vikram Pandit asking for relief. they did not lower my rate, but did give me a substantial credit. I subsequently paid off my card, and use it very sparingly now. The best and only defense a consumer has against the usurious practices of these megabanks is to just get out of debt, and stay out, even if it means denying yourself on the simplest of things as a consumer. Its obvious that these large banks function no different than streetcorner drug dealers, The Banks like Citi dont give a damn about the health of the average american, just their own profits, and people need to wake up and start realizing this.....
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11-21-2009 @ 6:35AM
Bet said...
I just opted out of my Citicard as a result of this BS! Got the letter informing me of the second across the board rate hike in two years! I just don't see how it can be legal to, arbitrarily, more than double my original fixed intrest rate on my existing balance as well as new purchases! I'm never late paying, typically pay more than the minimum due, and don't go over my limit. So, poke me with a fork, theives, I'M DONE!
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11-21-2009 @ 9:55AM
RJ said...
Citigroup is a choirboy compared to those SCUMBAGS at J.P. Morgan Chase. Just Google Chase Credit Card Problems and log on to the Comsumer Affairs website to see what I mean.
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11-21-2009 @ 10:24AM
LB said...
I have a RADICAL idea. Let's all call up our credit card companies and fire them. Let's cut up our cc's and stop using them. It might hurt at first but we can do it. An analogy might be if say we found out we had an invasive form of cancer. If we cut it out now we can begin to HEAL. If not the cancer (credit card giants) will cause our painful death. Let's not just LET them do this to us!
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11-21-2009 @ 11:25AM
BP said...
You guys are all idiots. Have you guys been livin in a cave for the past 2 years. Rates go up because defaults are rising. I got an idea einstein, nobody has a gun to your head forcing you to get or use a credit card. Live within your means and pay cash for your stuff and quit your whining.
BP
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11-21-2009 @ 6:33PM
RJ said...
Then why are the banks only giving me 0.5 or less interest on MY SAVINGS and CHECKING accounts and charging me 29% or more on my credit cards!!! EINSTEIN??? Government endorsed legal LOAN SHARKING that is why. You must work in the financial industry and probably in middle to upper management.
11-21-2009 @ 12:13PM
Alpha O'Mega said...
I call banks and credit card companies everyday with my clients. The rate-jacking started last October and has not slowed down. If you have a change in terms that will affect the interest rate on a balance you carry, you must either balance transfer it or opt out. Citi is trying to raise the interest rate on some accounts to 29.99%...that's the default rate!
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11-22-2009 @ 3:27PM
Single Mom on a Tight Budget said...
BP--I agree 100%. I too received letters from credit card companies raising my rate to 20+%. Citigroup simply closed my account, no if's or but's. I had over $35,000 in credit card debt less than a year ago and Bank of America cut my lines to just a few hundred dollars above my balances and sent letters raising my rates from 4.25% to something crazy (don't remember the rate, just remember that they were well into double-digits). I called them AND sent letters via certified mail rejecting the rate increase and now am simply paying the debt without using the cards. I am NOT in a management position, I am not taking sides here, but come on, people, lets be adults. Credit cards have VARIABLE RATES, that means they can increase or lower your rates at ANY TIME, and they are raising the rates because a bunch of "Einsteins" decided to spend all they could (buying houses, cars, etc. they couldn't afford to begin with) without thinking about how they were going to pay for this. You CANNOT buy a house on which you can only afford to pay interest (and only at a low rate) and simply HOPE that its value will go up and you'll be able to sell it for a profit.
Here's what I am doing to cut spending and where I've been successful:
1. Bought a freezer for my garage. Now I only buy meat/chicken when it is on sale and stock up. I pay $1.99 or less for ground chuck, $2.99 or less for stew/roast meat, $1.99 or less for boneless skinless chicken breast, $0.99 for split chicken breast, $0.39 for chicken leg quarters. Same with frozen vegetables and ice cream.
2. I signed up for Netflix and we stopped going out to the movies. We also watch lots of movies, shows, cartoons online on youtube.com.
3. I religiously use coupons and rebates for grocery store purchases, especially toiletries. I now have 3+ months supply of toothpaste, shampoo, body wash, razors, etc. which I have bought FREE thanks to matching coupons and sales. I ONLY use coupons for items I would have bought anyway. I do not try a new item UNLESS it's FREE.
4. I buy clothes off season and do look for coupons online.
5. I learned to cook watching FoodNetwork and searching for recipes on www.recipezaar.com. We eat out on special occasions ONLY.
6. I cook large batches of food and freeze leftovers in individual size portions so that I can take lunch to work with me EVERY DAY. It also saves money on my power bill because I only have to turn the oven on once. I try to do all of my cooking once a month so that I can have the rest of the weekends free. Also, I freeze a variety of cooked meals so that if my son wants my Mexican chicken with rice and I feel like eating lasagna, we can do so without having to compromise--just take out what you want and pop it in the microwave. I also don't have to cook during the week after work or worry about what's for dinner.
7. I use my crock-pot A LOT.
8. I use the local public library A LOT. Lots of great movies and school help DVD's for kids, cookbooks, and even books on tape I listen to on my way to/from work and it's FREE.
9. I spend time with my family and work out by going on brisk walks with my dog instead of paying gym membership fees.
Yes, the coupons and sales and cooking do take time, but I save time buy doing the things I listed in #6 and #7, so it all evens out.
Also, thanks to #1, #6 and #7, our meals are never more than $2/per meal/person.
I have never been late on a payment in my life, support a family of 3 and a dog on an annual income that is WELL BELOW three figures and if I can o it, anybody can do it. Just STOP going deeper into debt and blaming someone else for your lack of discipline when it comes to money. I'm not sure who said that, but "if you continue doing the same thing over and over, do not expect different results."
Happy Thanksgiving Everyone!
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11-22-2009 @ 3:31PM
Single Mom on a Tight Budget said...
Sorry, I meant WELL BELOW "six" figures, not "three." :)
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11-22-2009 @ 8:26PM
Bill said...
Citibank is like Harry Reid, doesn't care if what they want ruins the nation.
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11-22-2009 @ 8:40PM
Bill said...
Pay them off, chop them up, that way the only money you will pay to Citibank will be via your taxes for the next round of bailout.
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11-23-2009 @ 12:03AM
chinesedragon said...
Apply for as many cards as you can, with as much credit as you can. Spend or withdraw to the max in 1 month. Renounce your US citizenship and move somewhere else. Byebye, banks!
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11-23-2009 @ 12:58AM
Chris said...
This is nothing new. I called Citi last time and told them raising my rate was unacceptable. They complied with my wishes because I was polite, insistent, and resolved in getting what I wanted. More customers need to grow a back bone and step up to these banks!
"I don't need you, you need me. Remember that Mr. Banker!"
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11-23-2009 @ 12:57AM
sgentilejr said...
I repay my FULL balance each month and EVERY credit card I use PAYS ME money each month for using THEIR credit cards and THEIR money for 30 days. Some of us are wise and know how to play the game, while many others who post here are total and complete fools and they are so freaking dumb they even post to tell us all "hey look at me I am freaking dumb and I give Citi 25.9% of my earnings when I used THEIR card."
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12-10-2009 @ 11:10PM
stacy said...
I have a lot of credit cards with high credit limits but I don't charge them all at the same time or have revolving balances on all of them. I paid off half of them already while the others have low balances. I pay more than the miminum every month. I check how much interest I owe every month and pay the interest along with the miminum and add $10 dollars to that. The cards I paid off had about 8 percent interest which one of them was American Express. They raised my APR to 10 percent interest. I paid that off and will not be using any of those cards unless their is a emergency. I used those cards for the Internet which was not even worth the hassle and time of paying it off. I would rather have used my own money which I do now. No more statements. If they close my accounts because I stop using it once in awhile and my credit score drops I really don't care. The hassle of maintaining credit and my high score is not worth it to me anymore. I do set up a few bills to automatically pay way before the bill is due so I no longer have the hassle of paying it online or in the mail since the credit card companies like to change the due date every month so that you can mess up and pay your bill late.
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