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Credit Card rate increase!!
So I recently received a letter from Citi stating they were moving my interest rate from 5.99% to GET THIS.........29.99%
I've been with them since 1995, I've NEVER once been late, I have an over 750 credit score, so you can imagine my disbelief.
I've done some research concerning the credit card changes due to go into effect in Feb. 2010. I am contemplating opting out and just closing my card. I would still the balance but just with 5.99% interest. But I am very reluctant to do this as this is my one credit card I've held on longest. Sure I have other credit cards but this one has never let me down and I've never let it down. If the balance wasn't so high, I would just pay it off and tell them to go fly a kite, but that's not the case.
I swore I read somewhere that one of the changes going into effect in Feb is that you can call up your creditors and have them move your interest rate to the rate when it was lowest if you have good credit with them, etc.....Has anyone else read that? I would hold out until Feb with the 29.99% if I knew I could call in Feb and have them lower it again.
Does anyone have any suggestions how I should tackle this phone call to Citi? I've always called and had all my creditors lower my interest rate in the past but I think this time is different and there will be no room for budging. Has anyone else gone through this??
Thanks!
Re: Credit Card rate increase!!
Wow that increase is ridiculous. But I have heard that credit card companies are hiking up fees and rates now because it would be harder to do once the new legislation takes effect. Sometimes I really wonder if this legislation hurts us more or helps us more...
I would call Citi now to complain and see what happens. I think if you let it sit for too long, they'll just assume you're okay with the change, even though NO ONE should be ok with that kind of rate increase! Explain that you've been a customer with them for so long and stuff... and threaten to close the account. I know this is your longest account but for your other accounts, how long have you had those? 5 years? Because if you've had those other accounts for 5-7 years anyways, then it wouldn't affect your credit much even if you close the Citi account.
Jaime & Brent
Oahu, Hawaii | Sept. 9, 2005
My Food Blog - Good Eats 'n Sweet Treats
| Olowalu, Maui ~ August 6, 2008 |
| Family of 4 ~ April 2, 2011 |
| Family of 5 - October 24, 2012 |
I've seen some segments about this on the Today Show. I agree with pp that you should call, ask immediately for a manager, and request an interest rate decrease in light of your long history with the company. Sometimes it also helps if you have a specific credit card competitor to reference when you mention taking your business elsewhere -- they may try to match or beat that interest rate.
Ironically, credit card companies have said these insane rate increases are their way of "encouraging" people to pay off their balances and get out of debt, especially if you have a high outstanding balance. I also think they're pulling these stunts now, before their hands are somewhat tied by the credit card reforms expected to go into place next July.
Anyhow, if you can't reduce the rate, I would definitely close the account and just pay it off as fast as I could. Just be sure you have another line of credit or two so your debt:credit ratio doesn't get totally messed up, or (better) pay down your debt so it looks like you have way more credit available than outstanding balances.
Even if you can negotiate downward, maybe you can pay off whatever you can and transfer the remaining balance to lower interest or interest free cards until you can clear the debt. I wouldn't keep an open account with a company that had sky-high rates, even if I paid it off each month. Just not worth it. Good luck!!!
Jaime & Brent
Oahu, Hawaii | Sept. 9, 2005
My Food Blog - Good Eats 'n Sweet Treats
Agree with pp about the call and negotiation to keep your current rate based on your excellent history with them.
BUT! Don't forget that you can pay that card down to zero between now and February and still keep the card with the balance at zero. You don't HAVE to close the account to avoid the high interest rates -- you should just use other cards from then on.
Your credit score is based on numerous factors, one of which is "available credit." So it's good to have credit cards open with zero balances! MH and I have several cards that we ran up in grad school (including a Citi card) that we've now paid down to zero. Every now and then we'll make a small purchase on them and immediately pay it off, just to keep the card's status as active. Those cards help make our credit look really good. HTH!
Hah -- mrspresley beat me to it. This is good advice!
I think this is good advice if you are certain that you can refrain from using the high-interest card or can guarantee that you pay it off immediately if you should ever use it. Having seen a couple family members through credit catastrophe and bankruptcy, I play it more conservative and prefer to rid myself of unnecessary lines of credit. Especially in a tough economy, it takes a lot of self-control to avoid using available credit when money gets tight... and if you falter, then you're, once again, stuck in that crazy cycle of debt, high interest, and ever-increasing balances.
Re: maintaining your credit score. If you've also had other cards for a long time, that's good credit history, and if you're able to quickly pay down this balance so that you still have a good debt:credit ratio, I think it's OK to be done with the card, especially once your balance is cleared. Also, while having lots of available credit can improve your debt:credit ratio, having too much open credit can also come back to bite you if you apply for something big like a car or home loan. High credit limits (even when unused) suggest your potential to spend, and when factored against your income, might make you appear to be a credit risk, should you max out and be unable to repay it all.
DH and I have very few cards between us and have excellent credit. For us, the less we have to manage, the better. It also helps us keep track of exactly what we owe, so we can pay it off and avoid interest each month. Total personal opinion, though.
There really is so much to consider. I just wish they didn't make it all so complicated!
Ok, so here is what I did:
I spoke with my dad for a long time about it, got some advice from him, did some further research online and finally made my call. (FYI, I hate making calls like this!) So I get some lady, explained the problem, and she proceeded with some condescending essay (that she's obviously reading off the computer) about how bad the economic times. Apparently she/they figured that I haven't turned on the TV in 2 years. Little does she realize that I have NO job, desperately searching, so I'm well aware of the economic crisis in this country.
This instantly required a supervisor.
So I got Miss Supervisor on the phone and what that conversation amounted to was offering me a "loyal customer" rate. Whatever. Whatever changes my rate from 29.99%. It was changed to a 10.99% (which is still crazy to me, but MUCH different than the alternative). Its fixed for 5 years. BUT the catch is I can NOT use the card or the purchases are charged at 29.99%. Which is fine because we don't use our credit cards. We, too, had some nice purchases and vacations and are now paying back these balances.
I think it was Lindsay that asked about my experience. I would try to call again and speak with a supervisor, if you haven't done that already. Thanks guys for the pep talk. Always nice to see everyone's perspective on this.