The background: About ten days ago Citibank confirmed that it would be raising interest rates on some of its credit-card customers. A Citibank spokesman confirmed the rate hike, but didn't specify how many customers would be impacted by the increase. According to a Wall Street Journal source, the rate hike was expected to impact less than 20% of Citibank's card portfolio, or about 11 million customers. The spokesman was certainly given an opportunity to dispute that 20% figure, but didn't. We were also told that customers who are impacted should expect to see an interest rate increase of about 3 percentage points -- on average (story link here).
Need to write an opt-out letter to Citibank? Use this one (link here)
The setup: I have been a Citibank cardmember for nearly seven years. I have never been late. I have never been over my limit. I rarely use more than 2% of my Citibank limit during any given month. My current balance at Citibank is $0. I pay my balance in full every month. My Equifax FICO score is currently 786. I pulled it this morning (specifically for this story). Across all of my credit cards, I have less than 1% utilization. Indeed, I currently have $877 in outstanding balances on all of my cards combined. I pay all of my bills in full each month. My Bankcard Industry Option FICO score, meanwhile, was recently at 808. If you're not familiar with the Bankcard Industry Option FICO score, read my story about it (story link here).
The deal: I received a letter from Citibank on Monday. In it, I found a change in terms -- and a right to opt-out notice. Citibank, it says here, is increasing my variable APR for purchases. I will be priced at prime plus 8.99%, with a minimum of 14.99%. As of October 1, 2008, according to Citibank, this purchase rate would have been 14.99% (if the rate increase had been in effect at that point). That would be more than double my current rate of 6.65%. Turns out that I happened to pull my Equifax FICO score on October 1, 2008. That day, my FICO score was 777.
Also, and this is important: The Citibank letter says that these "changes will be effective for all billing periods beginning on or after December 3, 2008. The changes will be effective whether or not you receive a billing statement." I was curious about this statement, so I called Citibank this morning. I wanted to know what happens to those who wait up until January 31, 2009, to opt out. Will they be assessed the new rate until the time they opt out?
According to Citibank, here's how it works. Your current rate will stay in place all the way until January 31, 2009. However, if you do not opt out by that time, Citibank will retroactively charge you for interest from the December 3, 2008, date. Got that? Rates stay the same until January 31, 2009. After that, if you don't opt out, Citibank is going back and grabbing the accrued interest from December 3, 2008.
Now, to my point. I wrote a story about ten days ago detailing Citibank's proposed rate hikes (story link here). Since then, a boatload of readers have left comments (in the comments section of that story) telling me about their high scores and perfect payment histories with Citibank (see comments here). Given that Citibank has allowed all of its customers to believe that less than 20% of its customers would be receiving a rate increase, I found it fascinating that so many people were showing up on my site telling me that they have high FICO scores, perfect payment histories, no balances, and risk profiles that you wouldn't think would warrant a rate hike. Many of these customers, you'd think, would fall into the 80% of the customers who would not be seeing a rate increase. After hearing so many of their stories, I wrote a story late last week (link here) questioning the 20% figure being bandied about in the press. Indeed, I do not believe that Citibank is telling the truth about how many people are receiving interest-rate increases. As such, I said as much.
Last week I was convinced that more than 20% of Citibank's customers were receiving rate hikes. But I also said that I didn't believe that every customer was receiving one. Therefore, this rate increase was affecting more than 20% but less than 100%.
Now hear this: I believe that Citibank is completely full of it. Given my risk profile (very little risk), given my utilization (nearly nonexistent), given my fairly long history with Citibank (almost seven years), and given how well I have handled my accounts during the past 20 years, I am willing to bet that Citibank is perpetrating a total scam on its customers. Rather than fessing up, and simply doing what Nordstrom recently did with its rate increase (story link here), Citibank has decided -- it seems -- that it wouldn't go down well if it told everyone that a rate increase was being implemented on every one of its customers. Therefore, it has allowed a "source" to float the 20% figure in the press. And while I am talking about rates, we've been made to understand that the average rate increase would be 3 percentage points. I have not met a single person who has had an increase of 3 percentage points or less. In fact, nearly everyone has seen a substantial jump. I'm calling B.S. on that part of Citibank's story as well.
I'm calling Citibank out. Citibank, why don't you go on the record and tell all of your cardholders just how many people are being affected by this rate increase. Stop hiding behind your anonymous source. Citibank's customer-service representatives have been telling customers that this rate hike is being implemented across the board. Citibank, is this rate hike across the board? It's certainly looking that way.
I don't have to opt out of Citibank's rate increase. I carry no balances. This APR hike doesn't hurt me. However, I can't trust Citibank. How can I? My score is not far from 800. If anyone was safe from this rate hike, it should have been someone like me. Or people like those who have been leaving message after message (day after day) on my blog. I should have listened to my mom when she said that you can't trust bankers. She nailed that one.
Editor's Note: I have now written a follow-up story to this one. Please read it (story link here).
Less than 20% of Citibank's customers are seeing a rate increase? Something smells, Citibank.
I think I, and all of my readers, know what it is.