Hey Peachtree City, recently I was checking my Citi credit card account to see when my next due date was going to be as my wife and I try and budget things every month. My wife has had her Citi account about 13 years and I'd had mine about 5 or 6 years. During that time we have never been late with a payment. As a result, we had been rewarded with great interest rates of 6.740%. That is until I looked at my January statement and it had gone up to almost 25%!
Of course like most folks I was pissed off to the highest pisitivity! How could this be? I immediately called my wife and she instructed me to also check her account. Just months before CIti has reduced her credit limit in half without notification. Of course I checked and to my chagrin she had the same increase to almost her account.....almost 25%.
We immediately got on the phone and called Citi for an explanation. Their response was canned something to the effect that Citi had to start raising folks interest to cover the cost of them doing business! Come on.... that was a serious bunch of municia I told her! Well...that's the gist of what I said. My minimum payment had actually tripled...What did we do? I'll get to that in a minute. Oh yeah baby....now its personal! You might as well have stuck me up by putting a gun to my head and taking my wallet. In my mind Citi was that same thug on the street only with a suit and tie! If that's suppose to make me feel better!
Remember back at the end of September Citigroup bought out Wachovia for $1 per share or $2.2 billion dollars! Citi then got basically the same deal that The Fed Reserve established with JP Morgan Chase when it took over Bears Stearns. Citi would assume the first $42 billion in losses from Wachovia and would pay the FDIC $12 billion in stocks & warrants. The Feds would take everything else over that amount!
Okay, I'm calming down now so I can finish this story. Well...normally January always brings a Christmas hang over as most folks find out the true cost of the holidays. Now they are about to find out just how much that have really been scrooged! January will catch most people off guard as struggling banks are trying to cut risk are sending out millions of letters (some after the fact) informing customers that their credit limits have been cut....and SURPRISE - its not just folks with less than favorable credit struggling to pay bills. Its also affecting customers with perfect credit! Can you imaging the embarrassment at the register when your purchase is denied. Not to mention the fact that your credit has just taken a hit equivalent to that of an opposing quarterback on a blitz from the Pittsburgh Steelers on a below zero day....Yeah,its gonna hurt and for some it may know you down. For others it may knock you out of the game!
So what did we do you say? There is a little now option that you can use...simply opt out! What that means it that we did not accept the new higher rate. Its almost usurious to me at this point! As a result, Citi will return our cards to a variable rate...ours happened to be 5.99%. Now this is a variable rate and it could go up or down. Didn't seem like a problem now with the current state of the economy. Anyway, we would maintain that rate until our cards expired. At that time, the company would close out accounts but we would still be able to pay off our cards at the lower variable rate.
So make sure you check those credit cards bills and try and keep those balances at about half of your limit. If you are making a major purchase, maybe 10% to 15%. By the way, in case you didn't know there is a NEW FICO Formula! That's right FICO 08, is latest version of the FICO scoring model being rolled out. How does it impact you? Depends....more on FICO 08 later!
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