Interest Rates on Citibank Credit Cards No Longer Safe
In its effort to save itself from the credit crisis, Citibank is risking alienating the majority of its customers and federal legislators and regulators as well. Citibank started with a controversial new student loan policy announced after the Federal Reserve proposed regulations that would prohibit the announced practices.
Now, Citibank feels comfortable reconsidering promises made to consumers and legislators last year that it would stop increasing interest rates at any time for any reason. Citibank ended the use of universal default clauses and limited interest rate increases to every two years - on renewal of the credit card or late payments (as well as a few other reasons).
Apparently, it’s promise that “a deal is a deal” to consumers and legislators is as flexible as a fixed rate credit card. The entire story is well covered in the New York Times.
Although Citigroup is claiming that the policy didn’t attract consumers to its credit cards and thus wasn’t profitable, it could be that this is an effort by Citigroup to increase interest rates on risky customers before it is tougher to do because of credit card reforms by Congress or the Federal Reserve.
