Citibank: Transfer $5000 In Debt Onto This Card Or We'll Double Your APR
"It's the increased cost of doing business," was Citicard's constant refrain when Kent's husband called to complain about their latest pre-CARD act adverse action insanity: transfer $5000 in balances from other credit cards to this credit card or we'll double your interest rate. Listen to Kent's message left on the new Consumerist hotline and/or read the transcript:
TRANSCRIPT: "My name is Kent, and my husband yesterday we got a mailing from Citibank.
They're basically threatening to double the interest rate, or, not threatening, they were doing it. They're saying the only way he could lower it is if we transfered $5,000 in balances from any other card we may have. We have a balance on the card, but we haven't used the card in over a year.
So, basicaly, here, run up more credit. My husband say, this isn't acceptable, and he negotiated with them, and was just kind of hard with them.
They kept saying over and over again, "It's the increasing cost of doing business, it's the increasing cost of doing business." It was their constant refrain. The people were very well trained to stay on their message points.
It was interesting, they were basically saying "here, run up more debt." Obviously that's their business but it's irresponsible for anybody.
And it's just insane. The woman even said, "Well, we can do this." Well, we'll see." : END TRANSCRIPT
So let's get this straight. Bankers have to increase credit card interest rates to "price for risk," which, supposedly, is the increased risk that debtors will default in this economic client. But here, Citi is saying, become a riskier customer by putting more debt on this card, or we'll punish you by doubling your interest rates.
Let's cut the banker bullshit. It's not about credit risk, it's about profit risk. Citi is trying to drive away the least profitable customers, like Kent and her husband who haven't used their card in over a year, and saying that hey, if you're going to stay with us, you're going to have to be more profitable by having more debt for us to make money off of servicing.
Remember the bottom of the contract where it says they can unilaterally change the terms at any time? Well, that time is now.
The good thing is that Kent and her husband can probably reject the change in terms of service and interest rate, freeze the account (it's not like they're using it) and then pay it off or transfer the balance to another card.
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RELATED: Citibank To Charge Fees On Checking Accounts
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Comments:
If the "increased cost of doing business" is $5000, you're doing something horribly, horribly wrong.
@Coles_Law: Er, rather, the interest and fees on a 5k balance transfer-$150 + whatever the balance transfer APR is. Still not insignificant.
I'm willing to help out and let Kent transfer my credit card balances to his card. :)
kudos to consumerist for using google voice.
I haven't experienced any pre-CARD bullying except for my APR going from fixed to variable, and since I pay in full every month that really doesn't even phase me.
Time to reject that change in terms of service, freeze the account, and just pay it off.
@Alessar: This is exactly what I was going to say. It sounds like you don't want this card at the new terms. Close it and pay it off at the current terms. All it means is that you won't be able to add any charges to the account (ie, use the credit card).
It sounds like it's what you're doing now almost anyway, so do it, plus it seems like you'd almost feel like this is "sticking it" to Citi anyway. They don't get the higher rate, nor the hope of any new debt, but they have to keep the account open as you pay it off.
@Alessar: Citi might not allow that. I think almost all banks do for almost every change in the terms, but it's not actually a law. Yeah, you could close the account and all. But until the CARD Act goes into effect, banks can change the interest rate on old balances.
That sucks! Time for these folks to apply for a card from a credit union or a low-cost purveyor like Simmons National...
I received a letter similar from good old Bank of America, which offered me a 5% reduction in my future credit cart rate (all the way down to 16.99%! Woo-hoo!) if I moved balances to their card. I paid that card off earlier this year because, frankly, I don't trust them any longer after all the games they seem to play with due dates and other things. Suffice to say, I don't need that card, it is not one of my oldest cards, so it will be prime candidate #1 to get closed. Bank of America - glad I can do my part to reduce your cost of doing business!
@nstonep: The issue I see here is that there's no indication that Kent and her husband have a $5,000 balance anywhere. Citi wants them to transfer a $5,000 balance but that seems to be an arbitrary number - Citi doesn't know how much debt Kent and her husband have, so they're making up some outrageous number.
This is going to be interesting for clients, such as myself, who don't carry a balance on a card. I pay zero in interest so the banks' only source of profit is merchant fees. I haven't heard anything yet, but I suspect a few credit cards are ready for the shredder.
On that note, see the MSN posting on how to destroy a credit card. Cutting it up may not be adequate to prevent identity theft. They do suggest burning but burning plastic indoors is not a good move.
There's apparently several versions of their "offer" in the wild. The letter I received said I'll be raised to 23.99% unless I transferred $3,000 onto my card. I've carried a Citibank card for 17 years but have decided to opt out of their offer and close my account.
Well, the OP certainly shouldn't put another $5000 onto the card to retain the current rate. Citibank will just squeeze him again in a few months.
The OP's in a bad situation here without much control, but that's what happens when one takes on debt of this nature. Citibank doesn't want him as a customer. He should just pay off his balance as quickly as possible and close the account. If he can't lock in his current rate by freezing the card, he's just going to have to suck it up and pay it.
The moral: get your credit card balances down as quickly as possible, and think twice before re-establishing them when times get better. Stay in control.
@jpdanzig: Was actually going to suggest that. I just transferred all my credit card balances to a new credit union card with a 4.99% 2 year balance transfer rate. Also calculated how much it will take to pay off the balance in that time. I'll save about $1000 in interest, even with the transfer fees. The other card companies haven't even gotten around to raising my rate yet, scary to think about how much I'd save then.
Dear Online Merchants,
You are the reason I use a credit card at all,
but if this shit from the credit card industry
keeps up, I may just say screw it, it's not like
t-shirts, books, geek-toys and the like are
the necessities of life...
Kent and her husband can't pay off their debt immediately. This means that paying off the debt and closing the card is not an option at this moment. So all they can do is reject the new terms, transfer the balance off the Citi card and hope that their new company will not do the same thing to them.
Of course, if Citi happens to have the lowest interest rate of all their cards, it might be more prudent to transfer a higher balance off a higher-interest card and just comply. At this point, I think Kent and her husband have to do some damage control and mitigate the amount of extra debt they'll incur by simply having debt. They need to ensure the lowest interest rates possible. If Citi's current rate for them is much lower than what other people are offering, it may be helpful for them to just accept the terms to keep the lower rate - that is, if they have $5,000 in debt to transfer.
It seems like a good idea to not trust BoA, or Citibank for damn near anything these days.
@j-o-h-n: This is why I use my Visa debit card as a credit card when I buy online. At least the ones we get from our bank have some decent account protections against fraud. If someone tries to drain your account they will cover it. You can also do a chargeback if you paid as a credit card. I had to do that once for an online vendor.
@bohemian: But you're still using a card. Banks screw over people just as much as credit card companies. As much as I dislike many of the practices of Citi and BofA and everyone else, credit cards are necesssary for e-commerce, and they know it.
@TCama: I got one of these letters from Citibank earlier this week. They give you until December to opt-out of the increase, and pay off your balance at the current rate.
pay off *ALL* cards
don't use them,
every 6 months or so *CANCEL* the damn things
save money
only buy what you can afford
save money
@cornish: I got a similar letter from Citi. Rate will go to 20.99 unless I transfer a balance.
I pay it off every month, so I don't really care what the rate is, and with a 5% balance transfer fee (and no cap to it), I have to say "no thanks".
@j-o-h-n: You don't need a credit card for online buys. A debit card through your local bank/credit union/whatever, that uses Visa for instance, has the same no-liability on fraudulent charges. And everyone that takes a credit card online, takes a debit card number.
Citibank is a breed all its own. While almost every credit card issuer I have has slashed limits as a result of the credit crisis, Citi has nearly quadrupled my credit limit since late 2007.
When they tried to issue the adverse rate increase, it was coupled with a credit limit increase. As if they were rewarding and punishing me for keeping an "excellent" credit history with them.
Not to mention they are being very aggressive with their balance transfer promotions. Until the CARD act goes into effect in September, it's just their way of padding their profit margins - as payments only apply to the lowest interest subaccount.
@krose:
Yea, I got one too. They do allow you to opt out. Luckily they *only* raised mine to 21.99%. Also luckily, I pay my balance off every single month and have made hundreds of dollars off my credit cards.
In the past year, my citi cards went from 9.99% to 16.99% to 21.99%. Having had the card for 7 years and never missed a payment, it's an awful way to do business. But I'll keep my accounts open because I don't want to lose the length of time on my credit report.
People say it every time: switch to a credit union. They don't do that shit...yet (crosses fingers)
Very simply: they clearly don't want to do business with you, so don't.
Is it just me or are banks becoming the cable TV business? Every choice screws you somehow.
Chase boned me with some strong arm tactics. When they more than doubled my minimum payment amount, I called and told them I couldn't afford the new payment. They're solution was to keep my minimum payments percentage the same, but triple the rate on my low rate balance transfers for 12 months. After that, my transfers will go from 7.9% to 24.9%. It makes no difference to them that I have never been late on payments. Between my underwater mortgage and unscrupulous banks, it's time to start looking into bankruptcy.
I don't even know why Citicorp is a retail bank. They do everything they can to drive away customers. Bank in the 80s if you didn't have $5000 or more in checking or savings you couldn't make a transaction with a teller. You had to use the ATM. That lasted about a month until the uproar from people and the media was deafening.
@pecan 3.14159265: i have a feeling they know exactly how much credit debt they have. anyone with access to your credit report can see all of that information. that's really an even bigger problem
What interest rates are you people getting to begin with if they end at 23.99%? I signed up for a Simmons Bank visa card with a fixed 7% interest rate. Sounds like you're all getting ripped off.
@craptastico: My wife received a similar offer for $3000. And she has no outstanding balance anywhere, nor on the card. After 1-2 years, they say the rate goes up as well. Ohh, and they raised the transfer fee to 5%!
@snobum: Sorry, this attitude still bothers me - "Yeah it sucks, but I'm going to tolerate it because I'm worshipping at the FICO Altar". Nothing against you or anything, but I think it's high time we Consumers stop making poor decisions based on an anti-consumer number made up, and in this case manipulated, by the banks.
Close the cards that fail to provide you reasonable terms. Close the cards that attempt to extort you in order to boost their own profits. We need to take a close look at the real costs of our financial decisions, and stop basing valuing ourself based upon a number whose formulae is secret. We need to stop valuing ourselves based on a number that can be negatively impacted by making sound decisions. We need to stop valuing ourselves based on a number that can be negatively impacted by the very companies who judge us by it.
The OP is put in a very bad position. If you don't get into $5000 debt, we'll make this hurt with higher interest. If you do get into $5000 debt, you'll possibly hurt your FICO due to debt loading - which may further beholden you to them by reducing alternative credit lines. Like in War Games, the only winning move here is to NOT PLAY.
Anyone else loving the fact that we spent billions to bail out these banks, in order to have them treat us like absolute shit? (And I mean even worse than before, which I didn't really think possible)
They're driving all of their customers to credit unions and small banks that still have a soul . . . IMHO they're not "too big to fail," they're too stupid to win. Let 'em all crash and burn.
@pecan 3.14159265: So go buy $5000 worth of $1 coins from the US Treasury on another card. Transfer the balance to the Citicard to lock in the lower rate. Then deposit your coins at the bank and use the money to pay down the debt by $5k.
End result: you get reward points on another card, you lock in the low rate, and all it cost you was a trip to the bank.
I feel lucky that I have not had to get myself into credit card debt. The rate increases have no effect on me. I dont even know what my interest rate is on my BOA card. I really cannot see how companies can get away with changing the interest rates like this. Yes, its stated in the contract that they can change the terms whenever they wish. The contract could also say I must buy everyone at the local bank's branch a chicken salad sandwich every day for lunch, doesnt mean that it is legal.
And excellent use of Google Voice. Did it actually transcribe his voicemail correctly? Mine have been hit or miss.
@bohemian: That though has a risk. I use my credit card for the warranty protections, and pay it off every month. worst case I have a CU credit card I can use.
They are doing the same to me. They are raising my APR and wanting me to transfer stuff to the card. They also say I can just cancel my card if I don't like it. I have been a loyal customer for years and their card has replaced all my other cards so I'm not sure what options I have. Anyone know of a fixed rate rewards card that is less likely to pull this kind of garbage on you?
@pecan 3.14159265: Wow, you're right....on second read, they don't HAVE that kind of balance anywhere. That's insane!
@nstonep: No one should ever turn a short term loan from a credit card into a long term loan. The costs over 15/30/+ years is astronomical. The banks want their money (it is theirs, you know) and want you to pay over and over again to use it.
@A Penguin On The Telly: Before you put another single hard earned dollar on ANY debts to these charlatans, my advice would be to FILE. Yesterday. Like other posters have said, let 'em crash and burn, and refuse to PLAY THEIR GAMES! Fuck Fico.
Maybe, instead of transferring more debt into their CitiBank account they should transfer the CitiBank debt into another more reasonable account and tell CitiBank to "Kiss Off!".
@AllanG54: In America, yes. However, over here (China) they're pretty much the best place to have any kind of account for travelers. Only an annual fee of US$1.2x to maintain the account, waived for now to compete with the local banks, and support for withdrawals at any Citibank ATM. And they've waived every fee they have (including int'l ATM withdrawal fee) until end of this year (they started offering personal accounts again 2 years ago, so it's been going on for a while). And the tellers are actually helpful here.
@katstermonster: Right, so Citibank is basically saying, "you need to do this, so we won't up your interest rate" knowing full well that they may not be able to comply, so they wouldn't even have a choice. You can't transfer what you don't have.
Seriously, aren't these banks violating the RICO Act somehow? I mean, they raise interest rates, which deters you from using your credit card. The banks will then cancel you credit for lack of activity. That will intern go negatively towards you credit score which will hurt you chances to get credit towards a car or home loan at a descent interest rate. So basically, the banks are saying, "Use you credit card with this high interest rate, or will will kill you credit report!!" And now, they are adding other fees to undermine the CARD Act. If this isn't a sophiscated form of blackmail, then what is???
Hmmm...maybe he should do it?!? Try to qualify for a fixed rate loan, consolidate your credit into a single balance (if possible) then pay off the balance with the loan proceeds. Important part: put the credit cards in a safe deposit box.