Citi customers have the right to decline any such rate hike. But if they do, their account will be closed as soon as the card expires. And that's one of the more generous conditions offered by a leading bank.
Other lenders say cardholders who don't want higher rates can close their accounts immediately and pay off the outstanding balance.
Samuel Wang, a Citi spokesman, blamed the rate hike on the "difficult market environment" and "severe funding dislocation." In other words, business has gone down the tubes.
Citi lost $18.7 billion last year and received $45 billion in bailout cash from taxpayers.
"In light of these unprecedented developments and others, Citi is repricing a group of customers in our Citi-branded consumer credit card business in the U.S. to appropriately manage these risks," Wang said. "We are carrying out this repricing in order to continue lending in this environment."
American Express cited a similar rationale to explain why it had raised interest rates by up to 3 percentage points for millions of cardholders last month.
"It was because of the challenging environment that we're in and the cost of doing business," said Desiree Fish, a company spokeswoman.
A Chase spokeswoman declined to comment on the company's new $10 fee, saying only that "we make changes to pricing, terms or credit lines based on borrower risk, market conditions, and the costs to us of making loans."
So what can you do to protect yourself? The best thing, obviously, is to not carry a balance on your plastic. Or if you do carry a balance, don't let it grow larger. But that's not an option for many people, especially with jobs disappearing and money growing tighter.
If you have to carry a balance, limit the damage by using only one or two cards. Always make at least the minimum payment required. Late fees and higher rates ensue when payments are missed.
If you run up thousands of dollars in debt on multiple cards, you may want to contact a credit counseling service (as opposed to so-called credit repair services or debt settlement firms, which are frequently rip-offs and should be avoided).
A reputable credit counselor can help restructure your debt into more manageable payments and perhaps even bargain for better terms from banks, which ultimately would rather that you pay less than the total amount owed than nothing at all.
