Yesterday, a new breed of Citibank credit card complaints began pouring in, and these are just as disheartening, though seemingly less severe.  One visitor reported a rate increase to 23.99%.  Another reported getting a notice that their rate was increasing from 16.99% to 20.99% on the same day they got an offer for a .99% balance transfer.  A third reported that her rate was increasing from 12.24 to 16.99%.  This customer had a balance of $10,000 on her card, and the customer service representative encouraged her to keep her account open since the increase would only cost her $28 a month.  The customer service rep, apparently short on math skills, overlooked the fact that this amounted to over $300 annually.

Complaints about the Citibank rate increases that have been occurring have outnumbered the complaints levied against just about every other credit card company this year.  One visitor reported that she had to liquidate her savings and retirement to pay off her balance.  Another reported having to sell his shares of Citi stock (at profit, fortunately) to pay off his bill.  Others are simply confused.

Ultimately, the latest round of rate increases may end up costing consumers more than the dramatic 29.99% increases that flooded mailboxes earlier this month.  The reason these increases may pose a greater issue is that, on the surface, they are much less dramatic than the massive rate hikes.  Turning down and opting out of a 29.99% increase was a no-brainer.  But many people are thinking hard about what to do with 3% to 4% increases, as concerns for their credit scores come into play.

Unfortunately, a 3% or 4% increase in interest rates, especially ones that are already high, can make debt repayment very difficult.  At a 20% interest rate, every $1000 of debt will accrue close to $200 in yearly interest.  Thus, for those with good credit, opting out and applying for a new credit card may be the best option.  And for those with balances, taking advantage of a 0% balance transfer can really help reduce interest expenses and expedite the process of getting out of debt.  In the end, everyone must choose whether they want to do business with this company.  And if another credit card company will treat you better, then by all means take your business elsewhere.

Now, I don’t use my Citi card.  The APR is high, the rewards are lackluster, and I’ve already given them enough money via TARP, though haven’t we all.  My problem, however, is that I want the letter.  I want them to raise my rate.  And I want to leave my card open and never use it.

Fact is, I would have closed my Citi account a long time ago.  The only reason I keep it open is the fact it is one of the older accounts in my credit history and I don’t want to hurt my credit score.  Yet, when I open my mailbox and find no letter, I grow evermore scared that they will attack me in a different way:  with an annual fee.

Now, I have nothing but sympathy for everyone who has been hit with a rate increase.   Many people who have written in are enviable positions:  they don’t owe Citi money.  However, many others do owe them, and some owe them quite a bit.  Hopefully, they will be able to use another balance transfer credit card to take advantage of a 0% APR so they can pay down debt.  However, many will have to opt out, which could hurt their credit scores.

Nevertheless, as a Citi credit card customer who has not received a rate increase letter, I’m beginning to think that Citi will soon send out annual fee notices to people like me.  Since they know they can’t sqeeze me with a high interest rate, they surely will find another way to get cash from my wallet.  And an annual fee may be the next topic we discuss on this forum, not only for Citibank credit cards, but for all credit cards.

“Citibank credit card users across the country rec’d RATE HIKE notices this week – 21.99% !!!!! Seems the only way out of this soon to be illegal practice of BAIT & SWITCH is to “transfer” another $5000.00 to them!”

While this aggrieved customer may not be correct about a bait and switch, her complete posting contains some valid points.  What strikes me most is the way this offer tries to lure customers into staying with Citibank.  It is not a good deal.  Consumers can opt out and keep their old rates.  And if they want to do a balance transfer, there are good credit card companies offering 0% balance transfer deals lasting one year (you can view 0% balance transfer offers in the main section of this website).

Ultimately, consumers getting punished by Citibank with rate increases should go out of their way to stop paying interest to Citibank, whether by paying their bills off in full or transferring balances to another credit card company.  No one should accept a 29.99% interest rate unless they intend to never pay interest and no one should accept a 15% balance transfer offer when there are 0% balance transfer deals available.

Citibank’s decision to charge customers 29.99% is shameful.  It is causing Citi to lose their best customers and pushing other customers to the brink of bankruptcy.  So unless you want to help support this type of predatory lending, opt out of your Citi card, ignore the Citibank balance transfer offer, and transfer your balance to a company that won’t try to squeeze every penny they can out of you.

I searched Google news a few moments ago expecting to see results from the Wall Street Journal, the New York Times or USA Today.  Nothing.  And, since these are the only three papers anyone seems to read these days, that leads me to believe anyone who threw their rate increase notice in the mail will be in for a very big surprise when the new Citi interest rates take effect.

Ironically, the only mainstream news about Citi seems to focus on the fact that they cancelled a number of accounts last week without warning.  I found articles about this on MSN.com as well as in the Atlanta Journal Constitution.  Perhaps Citibank closed credit card accounts and sent rate increases hoping to distract the media with the less important, but headline grabbing story.  Honestly, however, I just can’t understand why the people who tell us what is going on in the world are too busy to talk about this unprecedented event.

I wish I was a conspiracy theorist and I could spin a tale that justifies the absence of this story from the media.  However, I think the real culprit is apathy.  Apparently, the fleecing of American consumers had become so ho-hum that a boy floating away in a balloon (or at least a fake story about that) is all they really care about.

Unfortunately, we all need to fall back on the tried and true method of word of mouth-tell your friends, tell a stranger who pulls a Citi credit card out of his or her wallet at the supermarket.  Tell whoever will listen.  If you don’t, then a representative in India will be telling them about it in a few months.  And that person will be told that 29.99% is the best rate available to them.  Hopefully, they’ll be able to transfer that debt to a balance transfer credit card.  But by then, a good rate may be 22.99%.

So far, I’ve found little more than a Huffington Post blog article, which for some reason rejected my comment on the story, and a small blog posting on MSN.  Other than that, no major media outlet seems to be interested in the story.  Have we become so accustomed to malicious credit card practices that this massive rate increase is no longer newsworthy. 

So I tried to contact ABC news.  No luck.  Apparently, no one seems to care that the financial well-being of tens of thousands of Americans is in danger.

And that’s my vent.  I am very privileged to have the opportunity to facilitate the sharing of information on this matter via the Balance Transfers Blog, but I am also deeply, deeply disappointed in the major media players for turning a blind eye to an event that has far reaching implications for everyone who carries credit card debt.  Shame on them.

1.)  Traditional opt out notices require those who opt out to accept an immediate closure to their account.  You opt out, the card is closed, and that is it. Period.  In the letter I reviewed, it states that the cardholder can use the card until the expiration date on the card.  This wreaks of trickery and my fear is that consumers who opt out but use the card after the opt out date will see their rates increased to 29.99%.

Consequently, I recommend that if you get this letter and choose to opt out that you CUT UP YOUR CARD and CANCEL AUTO-PAYMENTS.  While I don’t know exactly why the accounts are to remain open after the opt out, I think the safest thing to do is expect the worse.

2.)  The letter I reviewed offers a 10% monthly interest rebate.  On a 29.99% APR, that serves to reduce your rate to 27%.  This is clearly a ploy to prevent people from opting out, but if you’re reading my blog, I’m going to assume you realize what a joke that is.

3.)  Rewards, rewards, rewards:  The person who sent me a copy of the rate increase letter informed me he had over 80,000 Thank You Rewards points (also known as Thank You for Nothing Rewards or Thank You for the Bailout Rewards).  On page two of the letter, it states that all rewards will be lost when your account is closed.  Now, once again, because opting out and closing seem to be two different things to Citi, it is unclear when Thank You Rewards points will be forfeited.  However, I strongly recommend cashing in all rewards before you opt out just to be careful.

Ultimately, the only positive thing about this situation is the fact that many of you recieved this letter because you are good customers with good credit.  This means you can get a new credit card, do a 0% balance transfer, and are smart enough to opt out immediately.  Unfortunately, I learned that a lot of people ignore letters such as this, and I hope the mainstream media picks up on this story in time to alert others of this deplorable situation.

In case you haven’t had a chance to read this letter, here’s what Ken Stork (ironic name is real) delivered to mailboxes across America.

View Page 1 of the Rate Increase Notice (PDF, opens in new window)

View Page 2 of the Rate Increase Notice (PDF, opens in new window)

First off, most people will need to opt out of the rate increase.  Anyone that has a balance and cannot repay it before the rate jumps to 29.99% shouldn’t think twice about that.  However, closing a credit card account, especially if it is your only account, your oldest account, or your account with a very high limit will likely see their credit score hurt substantially.

To limit the damage to your credit score, apply for and open a new credit card account.  This will provide you with available credit at a reasonable rate and also provide the opportunity to transfer your balance from Citibank.  More importantly, however, the damage an account closure can have on credit scores may make it very difficult to get a new card in the immediate future.

Information on current credit card offers can be found in the main section of this website by using the left navigation or by clicking here to view current 0% balance transfer offers. 

Another important issue to take care of before you opt out of a Citi rate increase is accumulated rewards points.  Generally, when you close an account, you forfeit any credit card rewards your have earned.  Thus, be sure to REDEEM YOUR CREDIT CARD REWARDS before you opt out.

Additionally, we strongly request that you request CONFIRMATION that you have opted out in writing.  Earlier in the year, while other banks were raising interest rates, I heard from a handful of consumers who called to opt out but never had their account closed. 

Lastly, CUT UP YOUR CREDIT CARD and be sure to STOP ALL AUTOMATIC PAYMENTS.  This can lead to two problems.  First, using your card may void the opt out if they do not immediately close it.  Secondly, you don’t want to be late on other bills tied to your card.

I hope this information is useful to you and appreciate any other tips you would like to share with our visitors.  If you elect to open a new credit card and have any questions, please feel free to use the contact form for assistance.  For more information and to apply for a new credit card, please visit the main section of Smart Balance Transfers by using the left navigation.  On our site, you can compare offers and apply online for approval.

If you received a Citi rate increase letter and want to help out, please email us a copy.  However, PLEASE be sure to use a BLACK MARKER to cover any personal information such as your name, account number etc, as I would like to post this online.

Thank you in advance for your help and please see our tips on Citibank Interest Rate Increase Solutions for ideas on how to handle this troublesome development.

Option 1:  Opt Out and Open a New Credit Card Account

Unless you have the ability to pay your credit card balance in full, the best way to deal with an interest rate increase notice is to opt out by closing your account.  This will allow you to repay your balance at the current rate, ultimately saving you hundreds, if not thousands of dollars in interest expenses.  If, for example, you carry a $10,000 balance on a Citibank card with a rate that is moving from 15% to 29.99%, you will save around $1,500 in interest by electing to opt out.  This is a no brainer.  Don’t over-think it.  Get on the phone right now and opt out.

Unfortunately, opting out of a rate increase not only reduces your available credit, it also increases your credit utilization ratio (the amount you owe as a percent of your available credit).  Credit utilization ratio’s account for about 30% of your credit score, so closing an account can dramatically lower your credit score.  This is a problem, but not an insurmountable one.

Essentially, the best way to limit the damage an account closure will have on your credit score is to open up a new credit card immediately-as in, right now.  By opening a new account as soon as possible, you will increase your available credit, which will decrease your credit utilization ratio and thus increase your credit score.  More importantly, however, opening a new credit card account before Citi reports the account closure to the credit bureaus will dramatically increase your chances of getting approved.  Once your credit report is updated, your score will likely drop, significantly decreasing your chances of getting approved for a new card.

To compare current credit card offers and apply online, you can review credit card applications in the main section of Smart Balance Transfers.

Additionally, to estimate the effect an account closure will have on your credit score, you can review free credit report offers in the main section as well.

Option 2:  Get on the Phone with Citibank and Fight Your Rate Increase

Before the credit crunch, most credit card companies were willing to negotiate rate increases.  Today, they are much less open to negotiation.  Consequently, success rates can be relatively low.  However, if you want (or need) to keep your account open, call customer service and ask for a U.S. based representative.  Then ask to speak to their supervisor.  If the supervisor can’t help, ask to speak to his or her supervisor.  If you have no luck, retry the process four or five times.  Fight the urge to take your anger out on the reps-its not their fault, and you may get lucky.

Option 3:  Do a 0% Balance Transfer

If you have good credit, you should be able to qualify for a credit card that offers a 0% interest rate on balance transfers for 6 to 12 months that will have a much lower long term interest rate than 29%.  Unfortunately, consumers with $15,000 or more in debt may have a hard time getting a big enough credit limit to transfer all of their debt.  However, if you have a few thousand dollars in credit card debt, you should be able to get a 0% balance transfer credit card with a high enough credit limit.

Option 4:  Get a 2nd, 3rd, or 4th Job

Sleeping and spending time with family is over-rated.  Why not just work 18 hours a day and hand over whatever money you don’t pay in taxes to bail out Citibank directly to Citibank to cover your higher interest expenses?

Option 5:  Part with a Kidney

Sure, kidney’s are vital organs.  But doesn’t keeping both kidney’s makes you just as greedy as Citibank?  Why not sell one and give the profits to Citibank?

Final Thoughts:  Okay, maybe there are only three good options.  However, accepting an interest rate increase is not one of them.  The key to successfully dealing with a rate increase notice is to act swiftly to insure options four and five never enter your mind.

Note to Readers:  Please consider sharing your methods for dealing with Citibank interest rate increases with other visitors.  All information you post is anonymous and your insights can go a long way in helping others deal with this troublesome situation.

A few weeks ago, I wrote an article about Citibank raising credit card interest rateson a small number of store issued credit cards.  At the time, Citi had been generating very few negative comments from readers and it appeared as if Citi was shaping up to be one of the best behaved credit card companies.  I was proved very wrong, as CitiBank has substantially raised interest rates on an apparently large base of customers to as much as 29.99%.

Here is a rather colorful comment left by a visitor whose interest rate was substantially raised by Citibank:

“My citi (sic) card, which I have had for probably years and hav (sic)  never made a late payment, decided they wanted to raise my APR fro 14.99% (which is still high ) to 29.99%. I could understand if I late on my payments or not making payments at all. Then to top it off when I called the “customer service” witch was very rude and I felt like I was being told ____ off by her! I am so angry that this is happening and I can see that I’m not the only one…”

Prior to the credit crisis, it generally took a missed payment, bounced check, or over-the-limit transaction to trigger an interest rate increase to 29.99%.  According to many people who’ve written in about recent Citibank interest rate increases, they did nothing to trigger the rate increase.

For a person with a $5,000 balance on a Citibank credit card that previously had a 14.99% interest rate, a 29.99% rate will cost them close to $900 more in interest during the course of a year.

Ultimately, if Citi is unwilling to budge on a recent interest rate increase, the best more is to either pay your card off or transfer your balance to a new credit card that offers a 0% rate and a lower long term interest rate.

You can review, compare, and apply online for a new credit card in the 0% credit card section of this website.  Many of these card offer 0% rates on balance transfers as well as significantly lower long term interest rates.

Lastly, if you have had any luck dealing with a Citibank credit card interest rate increase, please share with our visitors.

Much has been made today about Citibank raising interest rates on consumers.  However, it appears the increases are only tied to co-branded store credit cards issued with Macy’s and Sears.  According to reports, the interest rate increases average 3%.  The media, however, has turned this into a headline story when, compared to the actions of other banks, this is a rather small increase.

Late last week, Chase raised minimum payments for some consumers by 150%, from 2% of the balance to 5% of the balance.  This has put many consumers on the brink of default, as once manageable payments have ballooned into mortgage sized responsibilities.

Similarly, Chase, Capital One, and a wide array of other banks have been sharply increasing interest rates on broad swaths of consumers with solid credit histories.

Perhaps the fact that Citibank is a semi-nationalized bank is causing this big uproar.  But ultimately, Citibank’s decision to raise rates on already high interest store credit cards people should not have been carrying balances on in the first place is one of the least newsworthy credit card headlines of the past six months.