Michelle Malkin has written about Citibank this morning. Indeed, my headline is her headline. It turns out that one of her readers, Elizabeth, received a nice letter from Citibank. In that letter, of course, she found what we've all been finding. A nice rate-hike notification. Elizabeth was miffed over the same stuff that we've been talking about here at CreditMattersBlog.com. If this recent rate increase affects less than 20% of us, and if the rate increase will be about 3 percentage points (on average), why do I have so many Citibank refugees posting away at my site?
From Elizabeth's email (which is now prominently displayed at Michelle's blog):When I called to opt out, a Citibank representative assured me that I did not have any problems with my account that would have prompted a rate increase and read me a canned message about the “current economic crisis” and how Citibank would otherwise be “unable to keep its doors open” if it doesn’t increase its cost of extending credit. It is my understanding that last week, Citibank told the Wall Street Journal it would be raising APR rates 3% on average and the rate increase would affect about 20% of Citibank cardholders. Sure. My fiance also received the same notice despite his high credit score. When he called Citibank, he was given the same canned speech.
You already know how I feel (story link here). I fully empathize with Elizabeth and every other Citibank customer who bought what Citibank was selling in the media.
You can read the rest of the Elizabeth's email at Michelle's site (story link here). Also, Michelle has a tremendously active readership. Unfortunately, Michelle's site is so unfreaking popular that registration to her site is unavailable. You can only read the comments posted there. How's that for popularity??
In addition to Michelle picking this up, Don Surber's blog has picked this up as well. Don has an interesting take on Citibank's actions. In referring to my situation, here's what Don says:I have got news for him: He’s a lousy customer. He does not borrow much or pay much in interest rates. Citigroup is culling the herd of non-borrowers — CINOs — Customers in Name Only.
That is good business.
CINOs clog up the computers. You have to send them monthly statements for their $0 balances. They generate $0 revenues.
A sound business practice is to place them on the iceberg and let them drift off to sea.
How's that for publicity? Hey, I'll take any kind of pub. By the way, Don, I get electronic statements. Citibank isn't sending me anything. What's more, I generate merchant fees (which drop straight to Citibank's bottom line).
You can read my counterpoint story here (link).
Anyhow, here is a link to Don's site (link here).
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Wednesday, November 26, 2008
Citibank Tells Cardholders To Take A Hike
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37 comments:
Congrats on getting linked to by MM. I was hoping your story would get picked up and break through the surface. Expect lots of traffic.
Maybe Michelle will talk about it on FOX News.
Michelle is great. Unfortunately, she doesn't have open comment registration right now. Her site is too popular. She probably wants to control the growth of it.
Meanwhile, my traffic is off the charts today. She has thousands of readers. They all landed here this morning.
Good stuff.
In fact, between getting highlighted yesterday at the Consumerist and today at MM, it's been busy around here.
CM, you've been all over this story from the start. Glad to see you're getting the exposure.
Yeah, both of Malkin's sites, MM and Hot Air, only offer open registration for comments from time to time.
Hot Air often posts stories from MM. Maybe Ed Morrisey or Allahpundit will pick up on this as well.
*Ed Morrissey
I just pointed to Don Surber's blog, too, Scott. he's saying that I am a lousy customer (and others like me), which is why it makes sense for Citibank to do what it is doing. See the link in my story.
You deserve it, CM. You have a great site and are active with your viewers. We appreciate it so enjoy! Citibank needs to wake up. Hopefully, people will wake up and dump them.
Thanks, JG. Thank goodness I am using Google's server. Who knows what might have happened if I was using a private server. Woot woot.
My readers are great, so it's all of us getting a little publicity today.
It's not just CINO's getting hit. People who carry balances are receiving the same increases.
Exactly. This is impacting those with balances and those without a balance. Seems like an indiscriminate move by Citibank.
I think we have to take into account that when Citi came up with this decision to substantially raise rates on what now seems like almost all of its customers, there was a very good chance that the company was heading for a forced sale or bankruptcy.
The published accounts of Citi's decision to raise rates (on less than 20% of its customers by two to three percentage points)or(any cust. who hadn't received an increase in at least two years)started appearing on Nov. 14th.
Scott, good point. But now that it doesn't look like Citibank is going anywhere, what now? Why not rescind those hike notices? Of course I'm making a naive comment, but you get the point.
They can unring the bell.
Wow! That guy is a piece of work. I would think with the current situation we are in, customer's who pay their bills in full on a half base is what you would want. Go figure!
Don has a point, Midnite. The problem is that his analysis is only half baked.
He got the part about CINOs being unprofitable correct.
But he missed the part about Citibank nailing customers with and without balances.
Don's argument is a lot stronger if Citibank is only going after customers who don't charge much, and don't carry balances.
But that's not what Citibank is doing here.
Therefore, Don's analysis is off a bit.
Hi CM. Unfortunately, I think Surber is correct. You're not the customer they are looking for. I think I probably am (and that's not a credit to me, unfortunately).
I haven't received a rate increase notice yet, probably because 1) I maintain a balance (I keep meaning to pay it off or transfer it, but haven't gotten around to it 2)I always pay and 3)they're already charging me more (see why I keep meaning to pay it off or transfer).
If they raised my rates, I might actually get around to transferring or just biting the bullet and paying it off rather than paying their too-high interest on time, every month.
Like I said, not necessarily a credit to me, but I think that's what Don is getting at.
Anon, I agree that Don Surber is on to part of it. However, my site is replete with comments about customers with balances receiving these rate hikes. You are not safe, in other words. Here is a link to all of those comments. Notice that people with and without balances are being targeted. There are 210 comments in that thread.
http://www.creditmattersblog.com/2008/11/citibank-to-raise-interest-rates-on-its.html?showComment=1226657820000#c4279690126633090854
As I said earlier, Don only has this story half right. In a vacuum, he is correct. But he's not paying attention to the rest of the story. The rest of the story shows that people, across the entire spectrum, are being hit with these increases. FICO scores over 800 have been impacted. People with balances of more than $20,000 have been hit. People with low FICO scores are getting hit.
I'd like to agree with Don, but I just can't. I can only agree with part of his analysis. That's because it's incomplete.
Great links, CM - congrats! I got my letter in the mail yesterday. Going from 9.99% to 16.99% - definitely more than 3%! Oh well, zero balance anyway, and it is going to be my PIF card for monthly expenses. They'll have to be happy with merchants' fees.
Marilie, thanks for the note. Yep. They'll have to be contented with merchant fees.
Post more often around here. You've been missed.
Hi CM,
Thanks for the link. However, the group you're missing is people, like me, with a balance, and who are already paying at least 14.99. It looks like everyone in the comments with a balance also had a low rate. So it appears that they are doing increases across the board---for customers below 14.99.
Anon, that's a great point about customers with higher rates. That could be the missing link.
Your comment is much appreciated. I'll keep my eye out for that little data point. See if my readers are saying that. I think you're right, though.
I like your way of thinking.
Anon, a quick follow up. There are those who did have rates where you are -- and did get a rate hike. I can see some of those people in my threads. But they seem to be few and far between.
By and large, I think most of us did have lower rates.
I have two citi credit cards......one is an American Advantage and the other is the Premiere Pass. the premiere pass was at 9.99 and i got the dreaded increase notice letter to 16.99. the american advantage actually had an apr of 16.99 and has over the last seven months been going down to 12.99. i have not received a notice on this account. i just called citi and asked if this account was also going to be soon receiving any such hike and apparently this account was not selected to. interesting........anyway, i've been balance chased unfortunately on my chase cards!!!! i am furious over that more than the citi increases.
Anon, thanks for the post. Those rewards cards tend to have higher rates to begin with. If cards are spared, I'm thinking those will be the ones.
As for the balance chasing, I wrote a nice story on that several weeks ago. Because I have no idea if you're a new reader here or not, I don't know if you've already read it.
If you haven't, look to the right and see my POPULAR TAGS. There is a tag that says "chasing the balance."
Tell her I'd hit it, if single. :)
Great article, Marcus!
Calling customers CINOs is a silly way to look at the merchant fees collected. They will eventually try raising merchant fees, which will be passed on to us.
What better way to make customers who are on the verge or defaulting actually default. Think about it, you have thousand's of customers who default and Citi gets to write these customers off their books and sucker US (the tax payer) into buying more poisonous debt by asking for more money from the gubbermint.
Jake, you'd hit what? Haha. You talking about Michelle? She's married!
You're crazy, pal.
Thanks for the laugh, though.
Anon, since there is an opt-out clause, this doesn't have to result in an avalanche of defaults. If there was not an out, I would agree with you, though.
Some customers will no doubt miss this notice in the mail. Hopefully they don't suffer because of it.
it just occurred to me that even though you may opt out of the citi interest hike, there is no guarantee that your current interest rate/APR will remain the same prior to the hike throughout the remainder of the period that you have if you were to opt-out.
none of these cards are fixed-interest rates so i am not put at ease that despite having a current 9.99 with a post 12/3/08 hike to 16.99, that if i opt-out, that the 9.99 variable will remain 9.99 variable until my card expires in 2010. it may be the case that these cards can go up to whatever rate citi wants even if you were to opt-out.
it's not like citi is saying in print, we are freezing all your current terms to remain throughout the period until your card expires.
anyone have any thoughts on this?
Here is the language:
"If you opt out of these changes, you may use your account under the current terms until the end of your current membership year or the expiration date on your card, whichever is later. We will close your account at that time. You must then repay the balance under the current terms."
This is where my law school training comes in handy. The first sentence refers to current terms. These are your current terms -- before an interest rate hike. So, they've defined "current terms" for us.
Now, go to the third sentence. Citibank is saying that you will have to continue paying down your balance -- even after the card is closed. You must pay under the current terms. Having already defined current terms, we know that it means current terms -- before the rate hike.
If Citibank tried to weasel out of that contract language, I can assure you that the consumer would prevail. It could be called ambiguous at best. And the court would weigh the evidence in favor of the consumer -- and against the drafter of the language (Citibank).
So, my thought is that your current terms are locked in -- even after the card is closed. A lawyer wrote that opt-out clause. "Current terms" has the same meaning throughout.
well it is ambiguous. since under the current terms, now, we are subject to a variable APR. that has always been our current terms of the card agreement.
furthermore, in the last two statements, re: we will close your account at that time (meaning in the future) which then the next sentence states you must pay the balance when it is closed under the current terms. would that current terms imply the terms that are current at the the time the account was closed - not necessarily referring to the current terms when you called in to opt-out.
to me it isn't as clear cut - although one can assume that current terms means the ones we have today. which goes back to the question, our current terms are whatever APR we have which is a variable one.
perhaps they have left it ambiguous to be able to weasel around.
i don't necessarily think citi really defined current terms as clearly as it needs to be.
Anon, thanks for the comment.
I understand your concern. Current terms, trust me, does mean the current terms that you currently enjoy (before the rate hike).
The problem is the word "terms." Does terms equal rate? That's the problem language. Our current terms allow for a variable APR, tied to LIBOR or Prime. Under our current terms, our variable rates are pegged to Prime and LIBOR.
Will our rates move with LIBOR and Prime after people opt out? It's my understanding that the rates are locked. But I'll call yet again and see if I get a different answer.
Stay tuned.
OK. I had a much more productive conversation that time.
Here's the deal:
If you opt out, you will continue to have your current rate (prior to any rate increase). Moreover, your current rate will -- and can --fluctuate with prime or LIBOR. Thus, even if your account is closed, you'll still see small fluctuations in the rate, because of prime or LIBOR.
Therefore, if you have a 6.99% rate right now, and you opt out, your rate will remain at 6.99% even after you close the account. But your current terms also allow for small fluctuations tied to prime and LIBOR. So, your rate could move higher OR lower, depending on market fluctuations.
NOW, moving to something else I just learned: if you opt out, but you miss a payment, go over your limit, or do anything wrong with the account, your rate could jump to the default rate. Again, your current terms allow that. And your opt-out terms would be no different.
If you opt out, can you still make charges on the card until it expires? Or would the card now be useless except for making payments on it? When I called I got two different answers on this. One woman said that the card could no longer have charges made to it and the other said you could keep using it under the same terms until it expires.
YOu can still make charges until the card is closed, Anon.
The person who said you could no longer make purchases is wrong.
Does anyone know how the 20% of customers were selected? I've had this card for over 11 years and never paid it (or any other account) late - ever. My rate went from 6.31% up to 14.99% but I was able to plead with a supervisor to lower to 12.5%. This happens to be my first ever credit card, so I don't want to hurt my credit score.
Allegedly the 20% represents those customers who had not seen a rate increase for some 2 years.
If you had seen your rates increase during the previous 2 years, you could call Citibank and tell them that you were mistakenly targeted for this increase (the recent one). Citibank, if you can prove that your rate was increased during the two years, will reverse your rate.
Citibank raised my 7.99% to 24.99%. I had never been late on a payment
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