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Bill Hardekopf
Published: 22 October 2009

In the past week, Citi has increased the interest rate on a number of their cardholders to 29.99 percent and cancelled the accounts of customers holding some of their gas partner co-branded cards. Bank of America notified some of their cardholders that it will begin charging an annual fee ranging from $29 to $99 on their cards beginning in February 2010.
These actions follow last week's earnings reports that revealed that banks and credit card issuers are still losing millions of dollars due to credit card defaults and delinquencies. Issuers and analyst expect this to continue into next year.
Credit card issuers are desperately trying to rebound after the collapse of the economy and consumer lending, but unemployment, the CARD Act and the possibility of new regulations are restricting traditional areas revenue.
Issuers must make changes, even if it angers Congress and their cardholders.
"Credit card issuers warned there would be changes if Congress passed new rules regulating them. They have already proved many times that they were not bluffing," says Bill Hardekopf, CEO of LowCards.com and author of The Credit Card Guidebook.
Here are the latest changes that have taken place and some consumer tips for responding to the changes:
* Citi is notifying a number of cardholders of APR increases up to 29.99 percent
To make matters worse, this is a variable rate that can escalate once the prime rate increases.
"We are hearing from customers with good credit histories that their rate has been increased to 29.99 percent for no apparent reason," says Hardekopf. "29.99 percent sends a message that Citi doesn't want you to use that card. It is a strong motivation to close your account."
If your rate increases and you carry a balance, call and ask them to reduce the rate. If that doesn't work, you now have a right to opt out of the rate increase by the deadline outlined in your notice. By opting-out, you can pay off the balance at the current interest rate for up to five years, but you cannot make any further charges on the account. Opt-out and pay off the balance as soon as possible. But before you opt-out, redeem your rewards.
You may forfeit the rewards once you have opted-out.
This rate increase comes at the beginning of the holiday season. If your rate is 29.99 percent and you keep the card, do not use this card during the holiday season unless you are sure you can pay off the balance immediately.

* Last week, Citi cancelled a substantial number of their MasterCard accounts, most of which were gas partner co-branded cards. Citi said that these account closings include credit cards affiliated with Shell, Citgo, ExxonMobil and Phillips 66-Conoco.
Some customers have complained that they did not receive notice of this. But issuers do not have to give customers advance notice of an account cancellation. Issuers have the right to close credit lines immediately, so cancellation notices can be sent after the card is cancelled. Even the CARD Act only requires that issuers give advance notice of rate increases.
Citi is also shutting down the Home Depot credit card effective at the end of October. Rewards will be honored through February 2010.
Customers should use their accumulated rewards very soon or they could lose them. If the cancelled card is a rewards card, the issuer may give a deadline for redeeming the rewards. However, if you don't see the notification in the mail or forget the deadline, you lose your rewards. In some cases, the rewards are lost when the account is closed, even if the issuer is the one who closed it.
Cardholders should be on the lookout for changes and notices from their issuers. This is a good time to use your reward points for holiday travel or early holiday shopping.

* Last week, Bank of America notified a limited group of cardholders that it will start charging an annual fee on their credit cards beginning in February 2010. The fee will range from $29 to $99 and will be applied to the selected accounts based on risk and profitability.
This action came only one week after Bank of America received attention and praise for promising to put a freeze on credit card rates.
"Nearly 80 percent of the credit cards in America do not have annual fees," said Hardekopf. "You can certainly find a comparable card without an annual fee if you shop around. Just make sure to analyze the terms and conditions of each card and if they are similar, choose the one without this yearly fee.
"Actions like these are rarely singular events. One issuer takes a new step and the others likely follow. Issuers are trying everything they can to reduce risk and increase revenue, especially since regulations are limiting their options," says Hardekopf. "Consumers have to pay attention to their bill and the notices they receive in the mail."

Bill Hardekopf is the founder and editor at LowCards.com a free, independent website that helps consumers easily compare credit cards in a variety of categories such as lowest rates, rewards, rebates, balance transfers and lowest introductory rates.

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