Unfortunately, I’ve come across some deceptive ads promoting phantom 0% for 15 month balance transfer deals, however, the ads lead to pages with 0% offers lasting 6 months.  On the average, 6 months is the new 12 months, and 0% for 15 months, is the new 0% balance transfer for life.  Things have changed dramatically in the consumer credit world, and 0% offers were one of the first victims. 

At present, the longest 0% balance transfer offers last 12 months, and these offers are few and far between.  However, they still do exist (for more information, see the balance transfer section of this website).  Although getting a 0% for 12 is still possible, you should expect, nay, welcome higher fees, as this has become the new norm as no fee balance transfers and fixed apr balance transfers have also gone the way of the dinosaur.

Whether or not more banks will extend balance transfer offers to 12 months in the near future is a question only time will answer.  As millions of consumers faced massively increased interest rates this spring, summer, and fall, banks not only made it tougher to get approved for new credit cards, but raised long term interest rates and shortened the length of balance transfer promotions.  Recently, introductory rates have gotten longer, but long term interest rates remain high, and are likely to move higher when the Prime Rate, currently at historically low levels, begins to rise, thus triggering the variable element of non-fixed interest rates to increase.

In the interim, the smartest thing consumers carrying credit card debt can do is to take advantage of the longest available 0% balance transfers and focus on paying down debt as quickly as possible.  The days of jumping from one 0% offer to the next have come to an end, and more and more people are opening up their credit card statements to find that a once reasonable interest rate is twice what it once was.

As the days began to pass, I grew increasingly frustrated.  While hundreds of responsible card members were contacting me, I feared that less responsible victims of this rate increase may not have noticed or opened their rate increase letters.  I blogged and blogged, and thousands of people have read my thoughts on the matter.  Unfortunately, the readers of this blog were often searching for information on the rate increase or looking for a balance transfer credit card to transfer their Citi balances from.  The people that needed to read about this, i.e., the people with high balances and a tendency to toss junk mail looking opt out notices in the garbage, were not getting information on this situation.

Now, over two weeks later, the Citibank interest rate increase finally got a nod in a Wall Street Journal credit card article penned by Karen Blumenthal.  Although the increase is not the focus of the article, Ms. Bluemnthal does mention the rate increase in the second paragraph.  Not the headline American consumers deserve, but a head start.  (By the way, Ms. Blumenthal’s article contains some very good general information about the direction of the credit card market as well as sound advice to consumers.)

As I’ve stated before, the real problems with the Citibank interest rate hike will not be known until those who failed to read their opt out notices see their interest rates tripled in a few months.  At that time, consumers will have no remedy.  Thus, it is my hope that more mainstream news sources cover this story, as the general public needs to be made aware of this situation, as many of the people who will learn of the rate increase with their statements arrive in the mail may not be able to qualify for the type of 0% balance transfer deals available to consumers today, leaving them stuck paying interest rates usually reserved for people who fail to pay thier credit card bills.

Whether or not the passage of the Credit Card Act was responsible for the unprecedented interest rate hikes that have left many Americans paying interest rates as high as 29.99% is an issue for debate.  I, however, believe the Credit Card Act triggered a domino effect, causing already nervous banks to overreact to the threat of more stringent laws.  This, in turn, fueled a nine month long parade of rate increases from just about every major credit card company, culminating in Citibank’s raising of interest rates to 29.99% two weeks ago.

Even without the new laws, credit card companies were facing massive losses and record customer defaults.  However, the new laws will change the way credit card companies do business, taking away risk controls and fee income that help offset the risk of unsecured lending.  Consequently, as the passage and implementation of the laws became a reality, credit card companies went into overdrive and interest rate notices became as common as pre-approved credit card mailings were two years ago.

Now, after the bulk of interest rate increases have already been passed onto consumers, Congress is looking to push up the implementation of the final parts of the Credit Card Act.  Unfortunately, it is too little, too late.  How much higher can Citibank raise interest rates?  Not more than 29.99%.  The same is true with most other banks, most of which raised rates this spring and summer.  Thus, with interest rates already through the roof, a move to halt rate increases on December 1st would be nothing more than a political sideshow.  And that show is financed by the increased interest rates we are paying in exchange for consumer protections that have done nothing but harm the finances of millions of Americans.

Sources:  http://money.cnn.com/2009/10/28/news/economy/credit_card_practices/?postversion=2009102816

Prior to the credit crunch, the majority of credit card complaints revolved around unfair penalties, most of which were clearly outlined in the terms and conditions of the affected party’s credit card contract.  During the credit crisis, the nature of these horror stories changed.  Rates were being sharply increased, credit limits were being cut, and accounts were being closed with no warning.

Ultimately, however, the horror stories that haunt me the most are the recent ones from Citibank credit card customers.  These customers have tended to have very good credit and long histories with Citibank.  Here is a prime example:

“I received the same 29.99% interest rate increase today and was shocked, to say the least. I have been a loyal customer for nearly 20 years, never missed a payment, never maxed out my account which has a 27,000+ limit, always pay at least twice what was due, and recently paid down my account balance to less than 100.00. And still I get a rate increase; this just doesn’t make sound business sense. If those of us who are “good” customers are getting treated this way imagine how they are treating “bad” customers. I must admit when I called the company they received both “barrels” full of my anger but it didn’t seem to faze them. Their excuse of “due to economic times” we need to increase your rate BS just caused more anger. Let me remind you not only do credit card companies receive income from these outrageous interest rates they also receive income from the numerous fees that they charge. An example of a fee we don’t often think about is the merchandise transaction fee, for every purchase we make the retailer is charge a processing fee for the “privilege” of doing a credit card transaction. The consumer ends up paying for all the fees that the retailer is charge through higher prices.
This is America; I am not opposed to a business making profit this practice just goes to far. Citibank/Citigroup’s practices, as well as others, are the reason we are in the economic crisis we are in today. They received millions of dollars in “bail-out” money from the tax payer, pay out huge “retention” bonuses and have the nerve to raise our interest rates. I say it is time to send them a message loud and clear WE ARE NOT GOING TO TAKE IT ANYMORE!!!! We all need to contact the media, our state and local government official and friends and get the word out about these “SHYSTERS”. I have used my Citibank card for the last time I challenge all of you to do the same.”

Yes, many people have been put in much worse situations.  But if banks are attacking their best customers, what can the rest of us expect.  Halloween is right around the corner, and the future acts of credit card companies may be the scariest things any of us sees this year.

A year ago, most balance transfer offers lasted 12 months, while some were good for as many as 15 months.  On top of that, many credit card companies offered fixed rates for life on balance transfers with interest rates as low as 2.9%.  The days of fixed for life balance transfers are most likely over.  During the past year, many customers who had fixed APR for life balance transfers were rudely notified that they would either have to pay 200% more every month or shift to a higher variable rate in order to maintain a lower monthly payment.

Given the high probability that low fixed balance transfer rates are unlikely to return in the near future, securing a 0% APR for 12 months on balance transfers and using that 0% period to pay down debt is clearly the best option for consumers looking to reduce debt and interest expenses.  On the average, a person with a 15% interest rate and a $10,000 credit card balance can save in excess of $1000 during 12 months with a 0% balance transfer.  With a 29.99% interest rate, such as those being forced on consumers by Citibank, the savings come to well over $2,000.

Hopefully, more credit card companies will bring back 0% offers that last more than 6 months.  Unfortunately, this is unlikely, as credit card companies continue to be very selective when reviewing credit card applications.

For more information on current 0% balance transfer offers, please see the credit card comparison section of Smart Balance Transfers by using the navigation on your left.

Citibank, which recently notified many of its customers that it would be raising interest rates to 29.99%, was not mentioned as reason for this initiative, though one has to wonder if the Citi rate increase was the straw that broke the camel’s back.

Unfortunately, like just about every piece of credit card legislation passed this year, Senator Dodd’s proposal will likely provide little, if any, benefit to consumers.  Most credit card companies have stopped arbitralily raising rates and the most atrocious rate increase-Citi’s 29.99% fleecing-had already inflicted massive damage on the wallet’s of consumers.

In all likelihood, it is highly unlikely that any credit card company would pursue massive rate increases at this time, and Bank of America has already stated that it will no longer be hiking interest rates.  Thus, Senator Dodd’s new proposal takes on the sickly smell of political posturing and may ultimately provide little benefit to anyone other than the Senator.

Clearly, a freeze on rate increases would surely provide peace of mind to many consumers.  However, the rate increases that began when talk of a credit card bill accelerated along with the massive rate increases that followed the passage of this bill have left many of us with interest rates that can’t really go much higher.

Nonetheless, it would be rude not to thank our elected representatives for proposing legislation that was needed two weeks or two months ago.  Of course, its a thanks for nothing.

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.

If you have not received a Citibank 29.99% interest rate letter (you view the letter here), then for the time being you are in the clear.  However, the Citibank rate increase – which takes effect anywhere from a few months to over a year from now, depending on the expiration of your card and your interpretation of the letter - may be providing some rather frightening insight into the future of credit card rates.  And this insight provides 29.99 reasons to get out of credit card debt now.

Essentially, the new credit card legislationprevents banks from arbitrarily raising interest rates into the stratosphere as Citi has just done.  However, it will not prevent credit card companies from offering you significantly higher interest rates when your credit card expires or when you go online to apply for a new one.  This is a big loophole that may spell trouble for anyone with credit card debt.  Here’s why:

Let’s say you currently have a variable rate credit card with a 14% interest rate.  The variable part of this rate is tied to the Wall Street Journal Prime Rate, which is presently at a very low 3.25%.  Should this rate increase to non-recessionary levels, it will likely jump to around 8%, bringing your interest rate up to 19%.  However, the Prime Rate has been as high as 20% in the late seventies and early eighties and remained around 10% throughout most of the eighties.  At those levels, variable interest rates might not only reach 29.99%, they may jump into the thirties.  And this is for consumers with good credit paying the average interest rate.

Fortunately, a return to double digit prime rates isn’t likely in the very near term.  However, if you check your credit card, the expiration date will likely fall within the next year or two.  When that date arrives, your credit card company has every right to offer you the same 29.99% deal that Citi offered its customers this week, forcing you to either close your account or accept an extortionate interest rate.  Given everything that has happened to credit card users this year, I think this type of tactic may become common very soon.

Citi is the first company to give its customers 29.9 reasons to get out of credit card debt; I doubt they will be the last.  Consequently, the only way to safeguard oneself from these absurd rate hikes is to focus on repaying credit card debt as quickly as possible.  As the name of this website implies, making smart use of 0% balance transfer credit cards is an extremely effective way to reduce monthly interest expenses and pay down credit card balances.  Anyone who can get approved for one of these offers should strongly consider applying, as these offers may not be around much longer.  The new credit card laws will provide consumers with some protection, but credit card companies will find ways to make money, and that money will ultimately come from your pocket so long as you are indebted to 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.