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Credit cards... man's best friend and sometimes worst enemy. Chances are if you are over 18 you have at least one of these plastic miracles sitting in your wallet. While credit cards can definitely come in handy they can also turn into your worst nightmare when you see your interest rates start to climb for no apparent reason. This is something that Citigroup Inc. (NYSE:C) is going to change for its card holders.As America has shifted from a manufacturing nation to a consumer nation, the average citizen has accumulated tremendous amounts of debt. It is estimated that the average amount of credit card debt per American household is in excess of $8,000. A pretty scary thought to say the least.
While credit cards can be a very useful tool in today's world, their interest charges can really kill you. For those people who are cautious with their credit and pay off their balances at the end of each month, credit cards are a great thing to have. They eliminate the need to carry too much cash around, they are useful for online purchases, travel expenses, pretty much anything in life. But for those who get by paying them off slowly over time they can be a killer.
While high interest rates can be bad enough what is even more scary is to open up your monthly bill only to find that the already sky high interest rate has risen even more. This is pretty standard practice among credit card companies and something that can push an already bad situation into a terrible one.
There are two basic reasons why companies will raise rates on you. The first is what is known as a "universal default" which is when a customer pays one of his cards late and because of this gets nailed with interest rate hikes on all of his credit cards. Another reason for raising rates isn't even a reason at all! It's known as "anytime for any reason" and is practiced by pretty much all the major card issuers. In a nutshell, this is basically saying "we gave you the card, we can assign whatever rate we want to it!" This is something that we all should be aware of.
Luckily for Citigroup cardholders, both of the above practices are going to be abolished. No longer will its cardholders ever have to go through a rate increase unless they specifically pay their Citigroup account late.
While the credit card industry as a whole is making changes to be more customer friendly, changes are definitely not taking place at all of the major issuers, or to the same degree universally.
If you're not sure of what the interest rate policy of your card issuer is, call them and find out! A five minute phone call may save you thousands of dollars down the road.
Michael Fowlkes has worked as a stock trader for seven years and spent the last two years working as an analyst for the online investment advisory service Investor's Observer.
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Reader Comments (Page 1 of 1)
3-07-2007 @ 12:01PM
Jane Mathews said...
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Have a super day!