Is this my personal bailout for the credit industry?
January 30, 2009 8:24 AM   Subscribe

Yesterday, I paid off Citibank for the last time. Today, I logged in to verify it had posted, and noticed my interest rate had jumped 5.5%. Has my new regime of frugality displeased the overlords?

(Anon because I know some of you and am embarrassed about my money issues.) Last year when I got serious about my consumer debt, I used Citi's low-APR balance transfer offers to consolidate all my credit card debt. The total of transfers and existing Citi debt gave me a balance in the mid-$20K; the transfer APR was 2%, and the purchase/existing APR was 13.3%.

The balance transfer period is about to end, so I decided to clean the dogs out of my investment account and get out of debt in one easy payment. Yesterday was the last day of my statement period; I paid the current balance in full. When I logged in today, the current balance was only the interest charge on the previous period, so I paid it off too. Then I noticed that my APR had jumped to 18.8% overnight!

I've seen a number of stories about Citi jumping people's rates inexplicably since the current crisis started. I know that, by not using my credit, I am less useful to Citibank. Still, I wasn't expecting a hike back to where I was in my less creditworthy days. Are they betting that I will be unable to resist using my card again and that I didn't notice the boost? Is the hike coincidental to the zero balance, making my ragefest at Vikram Pandit meaningless?
posted by anonymous to Work & Money (18 answers total) 2 users marked this as a favorite
 
I'd say you pretty much nailed it. Citi is rather notorious for this. I'd either dump the card (its not like you cant get a new one someplace else) or try and force them to reinstate your old rate with an ".. or else" ultimatum. May work. May not. In any case, Citibank is terrible (imho) and you are better off without them.

Gratz on being debt free!
posted by elendil71 at 8:35 AM on January 30, 2009 [1 favorite]


Just as another data point they randomly bumped my APR from a little under 10 to over 17 for no reason that I can ascertain beyond just because they can. I called and asked why they did this and they immediately offered me 11.49. While its not as good as it was before it would have essentially been a 5.5% tax on not paying attention. I'd bet they pull this shit all the time to take advantage of people who don't look closely at their bills.
posted by zennoshinjou at 8:46 AM on January 30, 2009


You might want to check your paper mail, especially if you generally deal with the account online.

Citibank sent out notices to many cardholders informing them that their accounts were going to have the interest rates raised, and giving people an opportunity to "opt out" (yes, seriously). I think their assumption is that many people will just ignore the notice, or not opt-out in time, and therefore get hit with the increase. The deadline to opt-out was sometime in January, supposedly.

So it's possible it's not specifically related to anything you did, although it might be.

Personally, I'd drop that Citi card like it's on fire. I wouldn't do business with that company if they were selling $5 bills for $1.
posted by Kadin2048 at 8:47 AM on January 30, 2009


I called my credit card company and got my rate lowered. It was easy.
posted by theora55 at 8:59 AM on January 30, 2009


Well, if you intend on remaining debt free, the APR doesn't matter, right? I'm only half joking.
posted by zsazsa at 9:13 AM on January 30, 2009 [2 favorites]


The hike IS coincidental to the 0 balance. Citi did a near-all-encompassing rate hike on its cardholders as referenced earlier by Kadin2048, these rate hikes are effective on your February statement.

The option to "opt-out" of changes to your cardholder agreement is required by issuers because they cannot change the terms of money they've already loaned to you without your agreement. However, if you choose to opt-out when a rate change occurs, the issuer will likely close your account so you will not be able to make any new charges at your old rate.

This is, however, no longer your concern as you've paid off the balance (you will likely still have to pay off lingering finance charges on your next billing cycle). You are well advised to close the card anyway, and migrate to a bank that will not issue blanket rate hikes to send a message, that's what I did with my Citi card.
posted by coryinabox at 9:18 AM on January 30, 2009


My rate also jumped something like 7%, to 18.99%, which must be Citi's way of saying "thank you for paying off your balance in full each month, asshat."
posted by disillusioned at 9:25 AM on January 30, 2009 [1 favorite]


Yeah, dump the Citi card. They are a shady sort and I have NEVER given them my business after a bad brush with them. Unexplained rate hikes, a flood of mail and how they post your payments? Oh yeah, dump them. Get someone else less shady.
posted by jadepearl at 10:02 AM on January 30, 2009


My credit card rates have stayed around 19% for years, and I've just assumed it's because I pay them off in full every month (hence the APR doesn't worry me, and I've never bothered to try and get it lowered). So yeah, I'm inclined to think that the rate hike is related to that.
posted by gaspode at 10:07 AM on January 30, 2009


If you're committed to staying debt-free and aren't going to carry a balance on the card, who really cares what the APR is?
Closing the card will only hurt your credit score, so why not just leave it open and make sure to not carry any balances? Open another card with a lower APR if you need.
posted by jckll at 10:14 AM on January 30, 2009


citi bank sent out notices that you need to opt out of the increase by 1/31/09. you just reminded me of it and i just called! it take less than a minute, really. the number is 866.565.7030. when the operator answers just say you want to opt out. they will send you email and snail mail confirmation. hope this helps.
posted by slograffiti at 10:42 AM on January 30, 2009


ALSO, this is important.

"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."
posted by slograffiti at 10:47 AM on January 30, 2009


Citibank did this to me as well. When the prime rate was high, they offered me a rate of something like prime + 1% (so my interest rate was about 10%). Then when the prime rate fell, and my interest was down to around 4%, they sent me a letter stating that they're hiking my rate up to 14.99% and that I could keep the current rate if I closed my account. That's exactly what I did. I couldn't use my card anymore, but I could pay the balance off under the current terms.

Note that in your case - since you paid it off already, I'd simply keep the card but never use it, and find a new lower-interest credit card. Having available unused available credit (and a high average age of open accounts) is beneficial to your credit score.
posted by helios at 11:02 AM on January 30, 2009


"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."

I believe this is how all credit card rate hikes work. If you've followed all the rules, they can still hike your rate, but you get the chance to opt out, and they get the chance to end your card when it expires. They can also claim you broke some rule (a late payment, e.g.) and do it unilaterally. (This comment is based on some articles I read over a year ago.)
posted by salvia at 11:06 AM on January 30, 2009


I've got a small balance on my Citibank card that I'm paying off completely next week, then that's it. My rate is currently 9.240% -- I'll see if it gets jacked up after the balance reaches 0 and report back.

(My feelings are mixed re: Citibank; the service is pretty so-so, but I haven't had any truly bad experiences with them. Maybe I'm just lucky. Anyway, since I just got a USAA card with a way lower rate, I'll not be using that Citibank card anymore. It's already shredded.)
posted by cog_nate at 11:49 AM on January 30, 2009


I have a (Sh)iti card and they pulled the same thing on me. I am keeping my card open, however, because it was my first, I've established good history with it and I think it would hurt my credit score if I canceled it. I never carry a balance on it so the APR isn't that big of a deal, but I will be taking it out of my wallet for a few months.

In about 6 or 8 months I'll call and ask for my rate to be lowered, and they'll work something out for me like they have a couple times before... just for asking (although they get to ask things too... "Would you like our Credit protector service?" "Would you like a Sham-WOW?" etc...).

So if you don't have a balance on it, and it is past the deadline to close your account, just store the card away and ask for your rate to be lowered once the economy recovers a bit.
posted by ijoyner at 2:54 PM on January 30, 2009


After they ticked mr off with the same evil plan, I ould charge something for less than a buck then overpay it by some change. They would send me a statement for a few months (at their expence) then issue a check for the odd change (also at their expence) Since I paid online this never even cost me a stamp, and I got the small, petty satisfaction of stabbing the demon with a tiny needle. Lets all join in!
posted by Redhush at 9:16 PM on January 30, 2009


Followup: my rate didn't go up.
posted by cog_nate at 6:44 AM on February 13, 2009


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