SecurityDude, CISSP-ISSAP is an IT consultant, Security & Privacy Advocate and blogger at large with over 20 years IT experience. SecurityDude shares tips, tricks, and info that the average networking professional will find interesting and indispensable.
In the last two months, I have received two letters from Citigroup advising me that they are changing the terms of both of my MasterCards. The letters advise me of my right to Opt-Out of the new conditions, but that if I do so the cards will be canceled when they expire.
I have a FICO score of nearly 800 and no long-term debt other than my mortgage. Citi has decided that although I have not missed a payment to a creditor in 15 years, my rate should nearly double from 7.99% to 14.99%. This, in a time when banks are borrowing the money they lend for next to nothing.
I usually don’t run a balance, but if ‘stuff’ really hit the fan, I have over $40K in available credit to ride out the worst of it. There is a HUGE difference in the amount of time required to pay down debt at 14.99% versus 7.99%. Let me give you an example. Let’s say you had a heart attack and needed $40K of medical care not covered by insurance. If you paid $750.00 per month at 7.99%, it would take you 67 months (5 years, 7 months). With the rate at 14.99%, it will take you 89 months (7 years , 5 months).
If along the way you missed a SINGLE payment, you would be bumped to the “Default APR of 29.9%“. At the Default Rate, $750.00 a month would not even cover the interest payments! You would have to pay $1000.00 a month for 227 months (18 years, 11 months). You would have paid $187,000.00 in interest for the $40,000.0 loan. This amounts to indentured servitude. Actually, 29.9% interest is worse. In the 17th & 18th centuries, an indentured servent paid off his or her debt in just 7 years. We desperately need banking and bankruptcy reform to avoid a future with no future. (I used the credit card payoff calculator at BankRate to generate these numbers)
In both cases, I said “enough is enough”. I opted out of the change in terms for both cards. Additionally, I wrote to Vikram Pandit, CEO of Citigroup, the Secretary of the Treasury, and Chairpersons of the Senate Banking, House Financial Services and Senate Finance Committees. For good measure, I also wrote to President Obama’s Chief of Staff Rahm Emanuel.
I am not only outraged that Citi is trying to extort ridiculous rates on my cards, but they are doing this after receiving over 20 BILLION dollars of our tax money in the T.A.R.P. bailout. I am no financial guru, but don’t you agree that if Citi and others RAISE interest rates, that will have a negative effect on consumer spending? This behavior cannot be tolerated in the best of times. 2009 is definitely NOT the best of times.
If you have received similar “love letters” from your credit card issuers, I recommend you follow my lead and Opt-Out of higher interest rates. I also recommend you similarly engage in a letter writing campaign to the financial decision-makers in Washington. If you have never written a letter to your lawmakers, Congress.Org has good samples you can copy and modify. For your convenience I have listed the names and addresses of all the relevant officials below.
It’s OUR money and we have to hold our leaders accountable for how it’s used.
The White House
President Barack Obama
1600 Pennsylvania Avenue NW
Washington, DC 20500-0003
The White House
Rahm I. Emanuel
Chief of Staff
1600 Pennsylvania Avenue NW
Washington, DC 20500-0003
Department of Treasury
Timothy Geithner
1500 Pennsylvania Ave., N.W.
Washington, DC 20220
Banking, Housing And Urban Affairs Committee
Senator Christopher J. Dodd
534 Dirksen Senate Office Building
Washington, DC 20510-0001
Finance Committee
Senator Max Baucus
219 Dirksen Senate Office Building
Washington, DC 20510-0001
Financial Services Committee
Representative Barney Frank
2129 Rayburn House Office Building
Washington, DC 20515-0001
After former President Bush signed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Chapter 7 bankruptcy (liquidation) became nearly impossible for consumers. The credit card issuers knew they had little risk of not being able to eventually collect on a debt and responded by irresponsibly lowering their lending criteria. They now have a free hand to abuse consumers with punitive rates and penalties.