other thoughts

Losing interest

[Wednesday: 3 miles]

I received a letter this week from Citi Bank. We have one of those merchant-branded credit cards from a big catalog retailer. They sell clothing, housewares, etc. Kind of like Land’s End but not them.

The letter was about how they were going to raise the interest rate on our card from 14.25% to 18.99% in a month or two.

Both rates are already variable, pinned to the prime rate in some way. So they aren’t doing it because of inflation or something like that.

I’m sure the miles of fine print in the card agreement allows this kind of thing. Any lawyer working for Citi Bank would know how to do that in his sleep I expect. But I decided I should at least register my frowny face in some way.

So I called up the toll free number that is printed on my bill. I spoke to a nice front-line phone answerer person, who of course can’t really do anything about it. I asked why they were punishing me. Wasn’t I a good customer? Didn’t I pay my bill? I was assured that it was no such thing. They were doing this to everyone, not singling me out. And the reason was “to be more competitive.”

I asked to talk to the next level of person. So, after being on hold awhile eventually the first person came back and said here we go, and transferred me to a dial tone.

I called back. I got to speak to another first level person and we had basically the same conversation. This time I was successfully transferred to a “manager” who gave me the same answers. She did assure me that my opposition to the rate change would be noted. I pointed out that being “more competitive” would seem to indicate an attempt to attract more business from me, the consumer. But we both knew that “more competitive” really meant getting in line with the other credit vendors who have inched up the rates over the years leaving 14.25% on the low end of the general offerings. They want to be “more competitive” in squeezing the borrowers.

After that fun I called up the merchant’s catalog order number and talked to someone there. I told them that it seemed like they weren’t happy with me as a customer if they were going to wring me for another 4.75% per annum. I have another card from a similar merchant… did she want me to start using that one more and her’s less? She noted my objection but said the rates were outside of the merchant’s control, this is all the bank’s doing. I left her with the cheery wish that she gets lots of phone call complaints so the merchant who-ha’s will know that the bank big-wigs just did them a wrong turn.

We will probably keep the card.

But it did get me to thinking… if Citi Bank wanted to jack the rates to 1000% they probably could give it a try. Maybe there are some legal limits to such a move. I guess they don’t do it because it would be counter productive to bankrupt all of their customers.

I confess I don’t understand the credit card business. They charge the seller a fee. Then they charge the buyer interest. And they have all sorts of camouflage kick backs and points clubs and whatnot so that an average person doesn’t really know what they are buying or how much it costs. But for some reason, they require a margin of 14.xx% over prime just to make a living. That’s crazy. I can buy a car at 2% or a house at 3.5% but shoes or plane tickets are 14.xx%. There’s a whole lot of space between 4 and 14 for some other kind of financial instrument.