Citigroup to raise card rates, cut jobs
If you've got a Citigroup credit card in your wallet, be prepared. The company plans to start raising interest rates for some customers. And it's rumored to be considering tens of thousands more job cuts. Jeremy Hobson reports.
Citigroup Center in New York City (Stephen Chernin/Getty Images)
More on The Economy, Spending, America's Financial Crisis
TEXT OF STORY
If you've ever worked at a company in trouble, you know it's never a good thing when the boss calls an all hands meeting. Welcome to Citigroup come 8 o'clock Monday morning. In a company-wide e-mail today, CEO Vikram Pandit told employees he wants to talk about Citi's accomplishments since he took over almost a year ago. But it might be worth going back farther than that to, say, 1995.
Shares of Citigroup, one of the biggest banks in the world, closed today at a level not seen in 13 years. It's lost money four quarters running. Twenty-three thousand jobs have already been cut, with rumors of tens of thousands more coming. And a new tactic that might affect you even if you don't work there.
Marketplace's Jeremy Hobson has more from New York.
Jeremy Hobson: Citigroup plans to start raising interest rates on credit cards for some of its customers. The move is intended to make up for a decline in credit card revenue due to fewer offers going out and smaller payments coming in. It's perfectly legal, but analysts say an interest rate hike of a few percentage points won't solve Citi's problems, problems made worse because of where many of Citi's consumer deposits are.
Felix Salmon: One of the huge differences between Citibank and any other American bank is that most of Citibank's deposits are abroad./p>
Felix Salmon writes the finance blog at Portfolio.com.
Salmon: That means they're not insured by the FDIC and that means that the people who have money on deposit with Citibank have good reason to want to move that money somewhere safer.
And with an ever tumbling stock price, Salmon says, a run on the bank becomes much more likely. That's why Citi's unsuccessful offer to buy Wachovia was such a big deal. Citi wanted more branches in the U.S. so it could hold more FDIC-insured deposits. Eileen Fahey is a managing director at Fitch Ratings. She says Citi is now at a competitive disadvantage because other U.S. banks have acquired their rivals.
Eileen Fahey: All of those benefiting from larger deposit bases in the U.S. and Citigroup's been challenged on that front.
The challenges appear more dire by the day. A number of Citi's executives reportedly bought over a million shares of the company's stock yesterday. That wasn't enough to boost the value or investor confidence that Citi can rebound on its own.
In New York, I'm Jeremy Hobson for Marketplace.
Comments
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From Washington Twp, NJ, 12/01/2008
I've been a loyal, on time paying cardholder for well over a decade. I too just recvd my notice that my 7% APR was being hijacked to 14.99% to cover thier bad debtors and poor business operations infuriates me. This move will expedite thier demise as customers who are able to pay will take thier business elsewhere ASAP or even take an 8% home equity loan vs. 14.9% they hope to charge. This move will boost short term cash flow for them as qualified consumers pay off thier balance in full-immediately- like I am doing and they will see no more future charges or interest flow from me. Oh, but dont close your account...make them administer it at a zero balance to keep your credit rating high at thier administration expense and let the customer have the last laugh.
Other more competive cards are now in the front of my wallet.
Good Bye Citi Card....I dont expect you to be in business 12 months from now :)
11/24/2008
I got a letter stating they are adjusting standard purchase APR rates to prime + 18.99% (so as of Oct 1 the rate is 24.99%). My rate is currently 7.49%. I asked them if this was true. The lady said yes and that it had everything to do with Citi's problems and nothing to do with me or my credit. I told her I opted out and cancelled the card. What a joke! I hope they rot.
11/24/2008
I got a letter stating they are adjusting standard purchase APR rates to prime + 18.99% (so as of Oct 1 the rate is 24.99%). My rate is currently 7.49%. I asked them if this was true. The lady said yes and that it had everything to do with Citi's problems and nothing to do with me or my credit. I told her I opted out and cancelled the card. What a joke! I hope they rot.
From Hugo, MN, 11/21/2008
I've been a Citi cardholder for 14 years and have never made a late payment....So they jack my rates even when I charge over $500 a month?? Whatever, they can close their doors then.
From pleasant hill, CA, 11/21/2008
Just got a letter from citi credit card(today 11/20/08 about my credit card..notice in change in terms...currently my apr is 11.4%..the letter states as of 10/1/08 my rates go to 24.99% for no stated reason.no late payment..etc....should not be legal for them to do this..
From Big Rapids, MI, 11/17/2008
Great, raise rates on the people that -are- paying their bills. Yay!
From Moraga,, CA, 11/16/2008
Well, I now understand how panics can start. Do you realize that the botched drop-in from Salmon leaves the impression that Citibank US deposits are not FDIC insured? My wife, after half hearing your story, frantically emailed our sons to get their money out of their Citibank accounts and CDs. Did you really think that Salmon was saying that there is no FDIC coverage for Citibank deposits, checking accounts etc.?
11/14/2008
It is almost scary how fast this happened. I saw C at near $100 2 years ago and then bought at $32 when the Soverign Wealth fund invested around December 2007. It is amazing how low it has gone from there. Maybe we should just rent stocks and not do the buy and hold as in the past.
john@sjebcdmz.com
From Allentown, PA, 11/14/2008
When I went looking for a new car and I was sad to find none of the American car manufactures were making a car I wanted.
Toyota and Honda offered the best car with the gas mileage I wanted, with the best features. The big three are so out of touch with what is necessary compared with what WAS making money.
30 miles/gallon may be the latest advertising come on. They can do better and should have stared years ago.
The Pirus started in the late 90's.
Get with it
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