One thing that will change is that many of us "responsible ones"--those who used credit cards for online purchases and paid the balance off but did consider the card as a form of insurance should a financial emergency arise--will have to rethink our plans. Now that credit card interest rates are approaching 30% in some cases, a large balance could be devastating to some. This is all the more reason to fund an emergency account and have cash on hand for life's little surprises. The party's over.

... your blanket suggestions don't suit everyone.

irony++

Find a card with better rates, screw the "age" of the card, and use it instead.

Look at it this way, would you continue to do business with Best Buy if they treated you like they can't trust you, simply because you've been going there for years? And there is a much nicer, more polite, and cheaper Fry's down the street? I don't think so...

Of course what's really funny is that since I won't be transferring a balance, and I'll still be paying the card off every month they're not even making any more money.

As always there is a 3% balance transfer fee and a $5 minimum but no maximum.

"It's the increasing cost of doing business." I actually got that this week as well when I started canceling my business (in this case my credit cards) with Citi due to the ridiculous increases in my APR and the looming $7.50/month checking fee. They made no effort at all in retentions to keep me as a customer, despite the fact they recognize I am a "good, long time customer who pays their bills on time." Absolutely ridiculous. No wonder I'm leaving!

@NeverLetMeDown: I beg to differ that they are only abusing unprofitable customers. I have had a citibusiness card for 5 years for a business I own. We charge, on avg, about $10K per month (mostly in business related travel expenses). I pay the bill on time every month, and rarely leave more than a thousand or so balance on the card (so they can get merchant fees AND a bit from me in interest). I do this purposely so that we will be seen as a profitable customer (we NEED the cards because of the travel).

Yet they have jacked up our interest rate DOUBLE in the last 12 months from 12.9% to 25.9%. And they have played the games of constantly changing the due date, and even called a payment late because I paid twice in one month and the second hit the account 1 day prior to the statement closing date (I was going on a trip out of the country and was unsure of internet access, so paid it before I left). I disputed that and they removed the late charge, but it's aggravating.

I finally called them a few days ago and said enough is enough. "We are excellent customers -- we are your profitable customers! Stop abusing us." They immediately agreed to lower the interest rate back down to 13.9%.

So don't think they don't play this crap on only their "unprofitable" customers. Seems more like they do it to everyone and push as far as they can to see what they can get away with.

The first increase was from 14% to 20%, and now it is going to go to 25%. If I wouldn't carry a balance at 14%, what makes them think I will at 25%?

I'll continue to use the card and collect my cash back until they finally decide to just cut me loose entirely. This is bullshit and has nothing to do with pricing credit risk.

Maybe people would have a better understanding of how credit works if the rules that apply to corporate debt applied to consumer debt. They are two entirely different ball games.

@mike1731: I did this with my mortgage. Transfered $10K to a 0% interest card for 18 months with a $75 cap on transfer fees. Wash, rinse, repeat and you end up with no mortgage, and paying less than effectively 1% interest in transfer fees.

@SacraBos: But if you have a card that you have had for a long period of time, and simply use that card for daily purchases, and pay the balance off in full every month...WHO CARES what the APR Rate is as you will never intend to use it.

Now yeah, if you carry a balance, do what makes sense to get the lowest possible interest rate or terms that will best suit your needs.

@NeverLetMeDown:

Except they will then find that when many of these unprofitable customers have some very profitable business to do, they will reject the bank that treated them like crap.

Citi screwed me back when I had a $500 credit limit, thus AMEX got my business when I had $280,000 in travel and business expenses.

\still don't carry a citi card.

@NeverLetMeDown: Have you been reading the same site as the rest of us? They aren't really driving away the riskier customers, they are targeting the ones that give the least amount of fees and intrest. They are keeping the bad risks, the ones who have a huge amount of debt and pay late occasionally.

Also, their terms were laughable. Minimum APR was prime + 11.99% or 18.99% at a minimum. No rewards card is worth THAT.

I call shenanigans on your post.

@SacraBos is absolutely right - this is symptomatic of a much bigger problem.

No Arnold Schwartzennegger FU-dropping note encoded into the margins.

What gives? It makes my puny brain h-u-r-t!

@StanTheManDean:

PS: Who cares if they raise my interest rates. The last time I carried a balance Jimmy Carter was president and I paid the minimum amount due for 1 month so I could enter a toaster give-away.

Let's cut the banker bullshit. It's not about credit risk, it's about profit risk. Citi is trying to drive away the least profitable customers, like Kent and her husband who haven't used their card in over a year, and saying that hey, if you're going to stay with us, you're going to have to be more profitable by having more debt for us to make money off of servicing.

BS. Kent and Barbie are the most profitable customers as they are carrying a balance on the card. They are also carrying a balance on another card.

You are right. It is about profits. And Citi wants ALL of Kent and Barbie's business to maximize their (Citi's) profits.

Obviously the credit card companies are now and always have been loan shark econo-thugs, and if you use a credit card more than a small small balance, they will get to own your fricking financial life, not unlike the mafia.

While to be fair our legislators have passed the CARD act, on the whole, I think our government is too stupid or timid or corrupt to deal with these monsters in a comprehensive, effective way to protect us. We are now seeing that these f*cking bastard bankers are OUT TO GET US, PERIOD. Responsible people who pay bills on time or use their cards minimally are now considered "slackers" or "deadbeats". The less wise people who put way too much on credit (like myself, previously) are becoming absolute slaves in the system with little or no hope except bankruptcy.

The next thing, and I really fully believe this, seeing how banks are, is that paper money and normal non-credit accounts like savings and checking will disappear and we will all be forced to put our money into DEBT accounts....just watch.

I actually got this same call. My interest rate is going from 14.99% to 24.99%. They gave me the same "cost of business" and would NOT budge on the rate. I said "Okay, so you're saying, for someone who's been with you 5 years and never been late, never anything you're going to raise my rate?"

I said "So you're telling me that you'd rather me pay off my balance if you raise my rate and get ZERO interest from me than keep my account with you at my current interest rate and keep paying you some interest?"

She said "Yes, we can't keep your rate where it is now, sorry."

How does that make ANY sense at all? Raise rates and get zero interest from me or keep it at 14.99 and get that interest? No wonder Citi is in trouble,

"It's the increasing cost of doing business".

WRONG. Profits are being cut by CARD Act so you are jacking up interest rates and fees to try and make back that money.

Why did Congress allow the credit card companies a window of time before the law went into effect to pull stuff like this??

I too received this letter, and I'm a Diamond Preferred AmEx cardholder with almost perfect credit. The shadiest part of this whole deal is that I noticed a marked increase in the number of cash advance check mailings about 6 months before this notice came. This tells me two things: Citi was hoping that a) I would be lured into upping my balance before the big bait and switch and b) I would tire of the "junk mail" and possibly toss the interest rate notice and not opt out of the existing balance interest rate lock-in. And if I did both, all the better for them.

Shady business.

"...bottom of the contract where it says they can unilaterally change the terms at any time"

Credit card agreements are contracts? That's news to me. A contract is where both parties have equal footing, both parties have rights, and where both parties sign the contract. I've never gotten a bank's signature on any credit card I've signed up for.

I got a similar letter from Citibank and I rolled my eyes when I saw it as their terms were unreasonable across the board. Since I don't carry a balance and hardly use the card, it didn't affect me. But I couldn't see how the new terms would be found acceptable by anyone. And that 5% transfer fee was just ridiculous. 5% so that they can get more interest payments from me? Are they insane? And if you don't like it you've got about a month to pay off your credit card. Nice. Real nice. Ain't it wonderful that Congress listened to the credit card companies when rewriting the bankruptcy laws? Because the credit card companies are so sweet and kind. Ptooie.

have poor credit rating

don't qualify for house

don't qualify for car

look bad to potential employer

have higher insurance rates

live in a treehouse w/ the other anarchists

@AK47:

They're driving away a lot of unprofitable customers (i.e. credit card customers with interest rates too low to match their risk, checking account customers with balances too low to cover the costs of serving them, etc.), which is exactly what they should be doing, to maximize the return to the taxpayer.

Simply put, there are customers a business would be better off without, and getting rid of them is a positive.

@guern:

"pay off *ALL* cards"

AGREED

don't use them,

BAD IDEA - USE THEM TO GET THE BENEFITS

every 6 months or so *CANCEL* the damn things

BAD IDEA - KEEP THEM IN A DRAWER, HELPS YOUR CREDIT RATING

save money

AGREED, AND CREDIT CARD REWARDS HELP

only buy what you can afford

AGREED

save money

AGREED

@astouffer:

Fixed just means it won't change with the prevailing market interest rates - the lender may still be able to change it at any time.

WRJ

Seriously, aren't these banks violating the RICO Act somehow? I mean, they raise interest rates, which deters you from using your credit card. The banks will then cancel you credit for lack of activity. That will intern go negatively towards you credit score which will hurt you chances to get credit towards a car or home loan at a descent interest rate. So basically, the banks are saying, "Use you credit card with this high interest rate, or will will kill you credit report!!" And now, they are adding other fees to undermine the CARD Act. If this isn't a sophiscated form of blackmail, then what is???

@katstermonster: Right, so Citibank is basically saying, "you need to do this, so we won't up your interest rate" knowing full well that they may not be able to comply, so they wouldn't even have a choice. You can't transfer what you don't have.

Maybe, instead of transferring more debt into their CitiBank account they should transfer the CitiBank debt into another more reasonable account and tell CitiBank to "Kiss Off!".

@A Penguin On The Telly: Before you put another single hard earned dollar on ANY debts to these charlatans, my advice would be to FILE. Yesterday. Like other posters have said, let 'em crash and burn, and refuse to PLAY THEIR GAMES! Fuck Fico.

@nstonep: No one should ever turn a short term loan from a credit card into a long term loan. The costs over 15/30/+ years is astronomical. The banks want their money (it is theirs, you know) and want you to pay over and over again to use it.

@themicah: and the 5% balance transfer fee. used to be 3% until all this fiasco

@pecan 3.14159265: Wow, you're right....on second read, they don't HAVE that kind of balance anywhere. That's insane!

And excellent use of Google Voice. Did it actually transcribe his voicemail correctly? Mine have been hit or miss.

End result: you get reward points on another card, you lock in the low rate, and all it cost you was a trip to the bank.

Anyone else loving the fact that we spent billions to bail out these banks, in order to have them treat us like absolute shit? (And I mean even worse than before, which I didn't really think possible)

They're driving all of their customers to credit unions and small banks that still have a soul . . . IMHO they're not "too big to fail," they're too stupid to win. Let 'em all crash and burn.

Close the cards that fail to provide you reasonable terms. Close the cards that attempt to extort you in order to boost their own profits. We need to take a close look at the real costs of our financial decisions, and stop basing valuing ourself based upon a number whose formulae is secret. We need to stop valuing ourselves based on a number that can be negatively impacted by making sound decisions. We need to stop valuing ourselves based on a number that can be negatively impacted by the very companies who judge us by it.

The OP is put in a very bad position. If you don't get into $5000 debt, we'll make this hurt with higher interest. If you do get into $5000 debt, you'll possibly hurt your FICO due to debt loading - which may further beholden you to them by reducing alternative credit lines. Like in War Games, the only winning move here is to NOT PLAY.

@pecan 3.14159265: i have a feeling they know exactly how much credit debt they have. anyone with access to your credit report can see all of that information. that's really an even bigger problem

People say it every time: switch to a credit union. They don't do that shit...yet (crosses fingers)

Very simply: they clearly don't want to do business with you, so don't.

Is it just me or are banks becoming the cable TV business? Every choice screws you somehow.

@j-o-h-n: ...yeah, you keep telling yourself that! You'll be back after the withdrawl hits...

@TheUncleBob: I, too, am willing to offer help!

@krose:

Yea, I got one too. They do allow you to opt out. Luckily they *only* raised mine to 21.99%. Also luckily, I pay my balance off every single month and have made hundreds of dollars off my credit cards.

In the past year, my citi cards went from 9.99% to 16.99% to 21.99%. Having had the card for 7 years and never missed a payment, it's an awful way to do business. But I'll keep my accounts open because I don't want to lose the length of time on my credit report.

@Coelacanth: Err, I meant February. (I have no idea why I typed September!)

Citibank is a breed all its own. While almost every credit card issuer I have has slashed limits as a result of the credit crisis, Citi has nearly quadrupled my credit limit since late 2007.

When they tried to issue the adverse rate increase, it was coupled with a credit limit increase. As if they were rewarding and punishing me for keeping an "excellent" credit history with them.

Not to mention they are being very aggressive with their balance transfer promotions. Until the CARD act goes into effect in September, it's just their way of padding their profit margins - as payments only apply to the lowest interest subaccount.

@j-o-h-n: You don't need a credit card for online buys. A debit card through your local bank/credit union/whatever, that uses Visa for instance, has the same no-liability on fraudulent charges. And everyone that takes a credit card online, takes a debit card number.

@67alecto: oh, and if I do transfer a balance, that rate will be 9.99 until January 2011.

@cornish: I got a similar letter from Citi. Rate will go to 20.99 unless I transfer a balance.

I pay it off every month, so I don't really care what the rate is, and with a 5% balance transfer fee (and no cap to it), I have to say "no thanks".

pay off *ALL* cards

don't use them,

every 6 months or so *CANCEL* the damn things

save money

only buy what you can afford

save money

@TCama: I got one of these letters from Citibank earlier this week. They give you until December to opt-out of the increase, and pay off your balance at the current rate.

@bohemian: But you're still using a card. Banks screw over people just as much as credit card companies. As much as I dislike many of the practices of Citi and BofA and everyone else, credit cards are necesssary for e-commerce, and they know it.

It seems like a good idea to not trust BoA, or Citibank for damn near anything these days.

Kent and her husband can't pay off their debt immediately. This means that paying off the debt and closing the card is not an option at this moment. So all they can do is reject the new terms, transfer the balance off the Citi card and hope that their new company will not do the same thing to them.

Of course, if Citi happens to have the lowest interest rate of all their cards, it might be more prudent to transfer a higher balance off a higher-interest card and just comply. At this point, I think Kent and her husband have to do some damage control and mitigate the amount of extra debt they'll incur by simply having debt. They need to ensure the lowest interest rates possible. If Citi's current rate for them is much lower than what other people are offering, it may be helpful for them to just accept the terms to keep the lower rate - that is, if they have $5,000 in debt to transfer.

The OP's in a bad situation here without much control, but that's what happens when one takes on debt of this nature. Citibank doesn't want him as a customer. He should just pay off his balance as quickly as possible and close the account. If he can't lock in his current rate by freezing the card, he's just going to have to suck it up and pay it.

The moral: get your credit card balances down as quickly as possible, and think twice before re-establishing them when times get better. Stay in control.

On that note, see the MSN posting on how to destroy a credit card. Cutting it up may not be adequate to prevent identity theft. They do suggest burning but burning plastic indoors is not a good move.

@nstonep: The issue I see here is that there's no indication that Kent and her husband have a $5,000 balance anywhere. Citi wants them to transfer a $5,000 balance but that seems to be an arbitrary number - Citi doesn't know how much debt Kent and her husband have, so they're making up some outrageous number.

That sucks! Time for these folks to apply for a card from a credit union or a low-cost purveyor like Simmons National...

It sounds like it's what you're doing now almost anyway, so do it, plus it seems like you'd almost feel like this is "sticking it" to Citi anyway. They don't get the higher rate, nor the hope of any new debt, but they have to keep the account open as you pay it off.

I haven't experienced any pre-CARD bullying except for my APR going from fixed to variable, and since I pay in full every month that really doesn't even phase me.

@Coles_Law: Er, rather, the interest and fees on a 5k balance transfer-$150 + whatever the balance transfer APR is. Still not insignificant.

If the "increased cost of doing business" is $5000, you're doing something horribly, horribly wrong.