Thursday, February 26, 2009

Citibank Hacking Lines Of Credit -- Again


In September, I reported that Citibank was shuttering a bunch of inactive lines of credit (link here). The accounts were closed "due to the length of time that has passed since it was last used," I wrote at the time. Now hear this: Citibank is, instead of closing accounts, now slashing limits across the board. A reader of mine was kind enough to share the contents of the letter he received.

Before getting to the letter, it's important to first explain the nature of these consumer lines of credit. These lines often have higher interest rates. They don't -- and shouldn't -- get used very often. However, they can serve as convenient bridge loans in a pinch. When Citibank rolled out its Citi Flex line of credit product a couple years ago, I applied for the account. I figured that it would be a nice complement to the rest of the credit products that I had. Turns out that I never used it. Never ran into the proverbial "pinch." Citibank, after about a year of non-use, shut my account down.

Here's what I wrote about the CitiFlex account when it got closed last year:

Frankly, I don't think Citi knew what it was doing when it rolled out this product last year. From the beginning, it's been a subpar product. There was no online access, you had to request checks over the phone, and, I believe, the checks always had an expiration date on them. Worse, it often took weeks to receive new checks.

Citibank has now stopped offering the CitiFlex product altogether. Existing CitiFlex accounts will continue to get serviced. This weekend's round of closures, though, makes me think that Citi would rather this product go away completely (including all of its customers).

And, so, fast forward to today. My reader received a letter from Citi yesterday. This is what Citibank had to say:

"As always we appreciate your business and want to let you know about a change to your account. Based on your spending history and since you are currently only using a portion of your available credit line, we have lowered your credit line to $X,XXX." I redacted the amount to preserve the privacy of my reader. His previous limit was in the mid 5 digits. "We value you as a customer and look forward to continuing to serve you in the future," Citibank concluded. I always chuckle when they tell customers that they're looking forward to serving them in the future.

So what should my reader do? Very simple. I understand that Citibank is willing to reinstate limits if you call them up and ask (hat tip Creditboards). The last phone number that I had for CitiFlex was 866-720-2495. You can always refer to the phone number in the letter -- if it's different from the one above.

At this point, Citibank should just do what I proposed the last time we went through this. It should discontinue the product (which it has) and it should close all of the active accounts that remain.

Clearly, this product has been a regret for Citi. It was an ill-conceived product. And it's been an unmitigated failure.

In the meantime, see all of my Citibank coverage here (link).

32 comments:

  1. Just did it -- requested reinstatement. Rep said would take about 4 hours for decision. Will apprise of result when learn of decision.

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  2. That was one of the main reasons I wrote this story. I wanted my readers to know that reinstatement is possible.

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  3. I've never had a citi card, but DH and I did have a signature loan through them when we had pay $8000 to replace an engine in our car and we were broke college students/ newlyweds who knew nothing of CC portfolio's or having cards for those "pinches". Never once during the time of our loan, did we ever have access to that loan information online. The interest rate was of course a joke. I am so glad we have been educated and wont need that product ever again. But all the stories lead me to ask, does Citi have ANY good products? LOL

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  4. I'm not too impressed with Citi's offerings these days. They have neutered some of their good ones. Take the Citi Dividend card, for instance. That used to be a solid, cash-back card. Last year Citi reined in the rewards. Eventually, they pulled the card from the Web site.

    I'd like to know if anyone is happy with Citi's offerings.

    Anyone?

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  5. I suspect the slashed credit limits may be related to the stress testing that's about to start by the federal regulators. The top banks may be shoring up their books by getting rid of outstanding/unused loan capacity. This reduces their capital holding requirements. Also, it could be a reflection of the deterioration in the securitized credit card portfolios, which are not performing as well as expected (read: tanking). As a card user, you never know if your account has been securitized and sold to investors.

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  6. Connie, good points. Especially about the capital holding requirements.

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  7. Wow, just called up and Citiflex reinstated the entire original credit limit, in less than 2 hours. Thanks so much for the timely advice.

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  8. Dan Ray from CreditCards.com here. Nice item! I just finished editing our weekly credit card rate report and I'll let you in on it a little early for a reason that will become clear momentarily: The national average APR on credit cards rose this week, from 12.27% to 12.33%. Why? Citi raised rates on two of its most popular cards.

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  9. Dan, you guys writing a story? Figuring that Citibank, with its 55 million accounts or so, can move the rate number up. Thanks.

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  10. The Only CITI card I have that gets any use is my Home Depot card- I did slip up a few months ago and had to pay them $5 in interest.

    Their 6 and 12 months SAC deals are pretty good- mine has a pretty solid 10K CL and had it over 50% for a short time a year ago.

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  11. Tim, I rarely use my HD card. But you're right. Good deals on them.

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  12. There's an interesting blurb at seekingalpha.com about Citibank selling its 17% share of Redecard. The panic continues.

    I've been trying to remember to use my Home Depot card monthly (paying it in full) so it won't be cancelled. It is great for free delivery on appliance offers. The finance charge was increased very slightly recently. But that doesn't affect me, as I have cash in hand before using it.

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  13. My "no preset" spending limit card was hacked down to a specific limit, which I am O.K. with (I pay the balance every month). I do not mind so much that they had to change due to the economic issues the bank was having, however I was treated like a low class ignorant person when I called inquiring what had happened to the "no preset" limit (the first time my card was declined and I was embarrased it happened I was not aware that all of a sudden I had a limit on the card). Anyway the fact that when I called three times to inquire about what had happened to the "no preset" spending limit, three different reps insisted on basically treating me like I was crazy, that my card always had a limit, I did not know what I was talking about, even though clearly when I asked the reps to look up my 12-year history with them, every month for the last three years, it showed my account OVER what they insisted was "the" limit (way over!!). They clearly did not understand their own product but made me feel like am totally stupid. I still have the marketing information regarding this card and how it was set up to clearly have a no-preset spending limit. So whatever, am not dealing with them anymore except to squeeze all my rewards out as much as possible. My other cards get used and the benefit of the transaction fees because am still spending the same amount of money every month, just using other cards.

    I did get a $2,700 cashback reward check from Citi last month for '08 spending.

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  14. Anon, regarding Redecard, thanks. I think I first heard about the Redecard sale about a week ago. Just Citigroup spinning off some of its assets.

    The beat goes on.

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  15. I have been lucky, sort of. I have small credit lines, and I almost never use them. So far no slash for me. If it happened, I would just apply for a new and better card.

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  16. Just received a letter in the mail that our credit limit has been slashed by more than 50% due to the low usage. This is ok with us except the impact it will have on our credit score as it increases the balance / available credit ratio. I called Citibank to request for reinstating the limit and they flat out REFUSED! This came as a great shock to me as I've been their customer for decades with no payment issues ever. They told me if I want to have my old limit back, I will have to request for a credit increase. I told them if I have to submit a credit increase request, which will lower my credit score, I much rather do it with another financial insituituion that takes the impact of their action on my credit score into consideration. With that statement, all the rep told me is "I am sorry, but is there anything else I can help you?" Am I overreacting?

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  17. Buta, when I get customer service reps like that, I call back.

    Call back and talk with someone else.

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  18. I have a Citi Diamond Preferred Entertainment Card and it's just blah. The only reason I have it was because they said that the Sony Card was being "discontinued" which was a total lie. My brother and sister still have theirs only they never redeemed points and I did. Go figure. The only benefit I've gotten out of this card are some small household/kitchen electrics and a push lawn mower. What really irks ms about this card is their over-sensitive fraud department. I tried to buy electronics from two online retailers and one was allowed and the other was declined. Then I tried to make a payment online and I saw that I'm being sent a new card. Second time within a year! Grr. I wish I could close this account but it has a moderate credit line and I've had it for eons.

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  19. You think CITI is bad . Take a look at BANK OF AMERICA. They cut my good standing account that never been late or over limit in 14 years from 28,000 to $700. I just paid down $2200 to $650 and they followed suit and bang the credit line built over years was gone.

    Watch BANK OF AMERICA closely or max your acct before they cut it.

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  20. I tried to use my credit card yesterday from Citibank, it was declined, when I went online to check it, it said my account was blocked. So I called customer service to be informed that it was closed? "Due to the banks decision" I asked why since I hadn't been late on any payments "based on a review of my credit report" which does not make any sense, I just got a new mortgage and a $52,000 line of credit and my credit is bad?!

    They gave me no notice whatsoever, I don't need the card but I am offended and find the lack of notice inconsiderate. Is there some other hidden reason why they would do this? I can't see it being my credit.

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  21. Matt, we could only venture a guess. Perhaps it just wanted to reduce exposure. It's just difficult to know. Maybe the new mortgage and credit line is what spooked them. That's as good a guess as any.

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  22. I am actually very impressed with the Citi Flex Line of Credit. It has been the best credit product I have. While my credit cards are charging me 20% + interest rate this account started at 10.99% and is now down to 8.24%. I don't have perfect credit either. I think Citi will be the bank I deal with the most, after finally getting a good deal with the Citi Flex Line.

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  23. One other thing...one this month's statement there is a notice that says "Effective immediately, credit line increases on Citi Flex Line accounts are no longer available."

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  24. Brad, interesting about the "no more credit limit increases."

    Thanks for sharing.

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  25. I just happened to find out by checking to see if my $2000 payment was received, that they had decresed my limit by $1400. I spoke to a rep who then transfered me to another department. That rep told me my balance was too close to the credit line, so they decided to decrease me!! WHAT!!! Needless to say, I was furious. No email or written correspondence. I pay this account on time every month and allow them to do direct debits each month so my payment is never late. I asked for my original limit to be reinstated and they did comply, but I'm still PISSED! They are messing with my credit score, which I don't appreciate at all. What else can I do? This is ridiculous!!

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  26. I just got a letter from Citi about my Flex LOC and they lowered it by $1000. I have automatic bank draft set up so it is never late. Says balance to credit limit too high and length account estabished. Well it is older and lower now thsn it was when they gave it to me, and from when I used it. They have NEVER received a late payment. I use it because it's one of the lowest interest rates.

    Giving me $1000 less available credit, thus lowering my score.. What next my Citi Card?

    Oh...stange...my checks expire within the next 2 weeks also.

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  27. I, too, had my limit cut by 2/3rds - never late on a payment, and had used the credit line very little. Yes, there goes the old FICO score. Other carriers have done the same, and now the debt ratio vs available credit makes us all look like deadbeats and po folks....I have decided to chip away and pay all my credit off, and then I will never bother another financial institution, and they can leave me along....

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  28. It gets worse. Citi has now raised the rates on these accounts without notifying account holders. Ours went from 8.99% to 14.99%.

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  29. I am outraged! I was not notified and my CitiFlex line has gone from 10.99% to 18.99%. I always pay more than the minimum due and am never late. I called customer service, of course there is apparently nothing I can do about it!

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  30. This product is officially discontinued as I got my statement today. The party was fun while it lasted. We bail them out and they shut us down. Wow!

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