With credit card deliqnuincies approaching a 3 year high, banks are getting a little skittish about who they lend money to. Raising rates and fees, suspending 0% balance transfer offers, and now a tsunami of credit limit decreases – all tricks designed to deter us from using the very products they’ve been busy shoving down our throats for the past decade.
In other words, if you feel like you’re being screwed a little more than usual, you’re not imagining it, and the mainstream media has begun to pick up on it.
Last week ABC ran a story entitled Credit Card Companies Slash Spending Limits:
Without even warning their customers, some credit card companies are slashing the maximum spending limits.
American Express, Bank of America, Citibank and Discover are among the major issuers who are lowering credit lines.
“Good Morning America” technology contributor Wendy Bounds stopped by the show today to explain what this could mean for the consumer.
Who’s at Risk
“The first people in the line of fire will be those who have high balances, people who have low credit scores and are not paying off their bills on time,” Bounds said.
But the pain is spreading to those with average or even good credit scores.
“Even those who are paying off in full, they are in the line of fire as well,” she said. “The banks don’t just look at the one card that you have, they look at your entire credit history. Having problems elsewhere? They know it. That could hurt you as well.”
The Consumerist also ran a story on Citibank raising rates on millions of its card-holders, often for no apparent reason. This comes literally days after the Treasury injected a further 20 billion dollars into the ailing bank.
In a statement, the company offered few details but acknowledged that it was “repricing a group of customers” in order to “continue lending in this environment.”
Those who pay their balance in full each month have nothing to worry about. And from what we can tell, “promotional balances” – such as that 1.9% balance transfer you might have taken advantage of – are not affected.
Based on admittedly-unscientific online discussions, customers across the risk spectrum have been targeted – including, most oddly, lowest-risk customers with top FICO scores who don’t carry balances. This would seem to indicate that the repricing is more widespread than Citi has indicated.
This deals an embarrassing death blow to the company’s enthusiastic promises last year, when Citi Cards CEO Vikram Atal told the United States Senate that they would abandon the practice of hiking rates on existing balances. Atal said the company was “giving up that practice,” and
“…will not voluntarily increase the rates or fees on the account until the card expires … the only reason we would consider increasing the rates or fees before the card expires would be if a cardholder pays Citi late, exceeds the credit limit, or pays with a check that bounces. We believe we are the first bank to adopt this policy.”
Citi claims that the rate increase will affect only 20% of its customer base, but anecdotal evidence would indicate that this number is much, much higher.
Anyone received the dreaded rate-jack letter from Citibank (or any other card issuers, for that matter)?