Uh oh, the banking situation is getting worse, not better, and guess who is going to get stuck with the bill not once, but twice:
Citigroup is reneging on a promise it made to tens of millions of credit card customers in good times.
After pledging that it would no longer reserve the right to raise interest rates at any time for any reason, Citigroup now plans to start raising rates for customers who have not had an increase in at least two years. The move appears to backpedal from a commitment that Citigroup executives made to Congress in early 2007 when they tried to fend off greater regulation by promising not to raise rates until an account expires.
Citigroup attributed its decision to the “difficult market environment,” suggesting that the cost of the program — on top of sharp increases in its borrowing costs and severe anticipated losses — cut too deeply into profits. The bank said the policy change would only partly offset a $1.4 billion third-quarter loss for its credit card unit. However, it declined to provide specific figures.
That’s right, first the taxpayers are going to have to pay for the bailout for generations to come, and now we get hit with larger fees. This news breaks at the same time we learn that Citi is going to layoff another 50,000 people:
Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz) said on Monday it plans to cut about 50,000 jobs as souring economies and global credit conditions cause the U.S. bank with the farthest reach worldwide to retrench. The cuts are expected in the near-term and are on top of the roughly 23,000 jobs eliminated by the second-largest U.S. bank between January and September.
Do I have a problem with a private company making staff layoffs, or increasing the fees for their services? Normally, the answer would be, “No.” However, that answer becomes more complicated when the company is a recipient of a federal bailout with my tax dollars.
In these dire economic times, you have to wonder who would want to go into banking? Well, it turns out its hard to find a business that would not like to go into banking. My suggestion, you better start paying close attention to the legalese mailers you get from your credit card companies, or you are going to open a statement and be unpleasantly surprised by the fees you find.
A final note: You can avoid the higher fees if you let your lender know that you reject them and close your account paying off your remaining debt according to the original terms (i.e don’t be late). The irony of this is that this means less lending, the precise thing the whole bailout was intended to avoid.