George S. May Business Blog

Citi, expecting the enforcement of new credit card regulations, raises the rates of 14 million cards

Taking advantage of the slow process of getting Federal laws into place that will limit the banks in raise the rates on customers who hold existing credit cards, Citigroup went to work. Reports come, from people close to the situation, that Citi has raised the rates of somewhere between 13 and 15 million co-branded cards. A co-branded card, for example, would be a Sears credit card.

In short, if you had a co-branded Citi card that still had an outstanding balance at the end of the months between January and April of his year, your rate on the card likely rose around 25% (or 3 percentage points).

Citi’s response to the report?

“We have adjusted pricing and card terms for some customers as part of our regular account reviews. This is an ongoing process to ensure we offer terms, interest rates, credit lines and products based on individual needs and risk profiles. These changes also reflect the dramatically higher cost of doing business in our industry as we work to preserve the broad availability of credit.”

These are the type of underhanded moves that really make my skin crawl. Citi, and most other credit card companies, for that matter, have their customers sign these agreements that basically set strict guidelines for the user, but allow the provider to do whatever they please. Citi just relinquished something like 34% of their company to the government. The knowledge of that, in combination with the fact that they see these new regulations coming down the pipeline that won’t allow them to unexpectedly raise rates and take advantage of their struggling consumer, has got them thinking, wow we better get them while the getting is good. So what do they do? They take it straight to their customers with a swift gut shot. The whole process is unfortunate and makes me sick.

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