I’ve been using this credit card from Citibank â€“ Citi Diamond Preferred card for about two years. I am 100% satisfied. It doesn’t grant any incentives, but it has low APR and a 12 months introductory period on purchases and balance transfers. And it was so disappointing to hear that Citigroup is going to raise interest rates for consumers who haven’t had an increase over the last two years.
I hoped the news was hearsay, since Citigroup made a commitment to Congress and to tens of millions of credit card owners in early 2007 not to raise interest rates until an account expires. I looked through financial news rolls on the Web and it turned out that Citi actually reneged on their promise.
Of course, the commitment was made back then when the economical situation was stable and the words “credit crisis” weren’t on everybody’s lips. The promise is going to turn 2 years old in a couple of month and its baby teeth grew stronger and can bite pretty hard. So, the pledge not to raise rates until the expiration of an account will sink into oblivion soon.
It is clear how Citigroup explained their decision. “Difficult market environment” caused sharp cuts of profits and severe losses ($1.4 billion in the third quarter) in Citigroup’s credit card sector. So, they have no other way out but increase borrowing costs. John P. Carey, the chief administrative officer for Citigroup’s credit card unit, stated that the Citi’s business is repeatedly evaluated. The company is performing at its maximum efficiency. Citigroup is planning to carry out the above-mentioned re-pricing in credit card division to maintain lending services in this environment.
Citibank’s customers will be notified about the rates increase in their November statements. Those, who pay their credit card bills online, will get separate mailings.
But the situation is not that hopeless. Citigroup gives cardholders the right to turn down the new higher rates until the end of January. Credit consumers that will decline the rates increase will be able to pay down their balances under the old APR and other pricing terms. Besides, the charges they will make will accumulate the same old interest.
After their card expires, customers will have to find a different lender or reapply for a card. Now the most important part. How much is Citigroup going to raise the rates? As they said, the rise will be by two to three per cent on the average. So, if you have, say, an airline miles rewards card from Citi with a 17% rate. Next month it might cost you 20%.
But still remember about the “decline higher rates” option. This forthcoming change doesn’t mean you need to cancel one of your best deals right away.