Citigroup reported Friday a first-quarter net loss of 5.1 billion dollars, hurt by at least 12 billion dollars in write-downs amid soured subprime investments, and said it would cut an additional 9,000 jobs. Will Citigroup look for reasons to raise credit card rates, as we see with other banks involved with subprime? Although Citigroup has some cards with rates at 1.99 and 3.99 percent, we do not expect Citigroup to react like HSBC has in many cases. HSBC often raised credit card rates to 29 percent with no explanation other than “business reasons.” Of course Citigroup will raise rates if the cardholder misses a payment.
We do not expect Citigroup to raise rates simply because other credit cards held by an account holder raised rates. To do so would put the bank in a bad situation if blanket increases caused an account holder to go under, or forced them into bankruptcy. Citigroup once offered a card with an interest rate of 4 percent below prime. When interest rates dropped below 4 percent, Citigroup billed customers 50 cents as a finance charge, and was later sued. It was a costly and unexpected experience for Citigroup, although their reaction to the problem is what leads us to believe they will not attack their current customers.
If there is evidence to reverse our position we will report it promptly and fairly. Just let us know.