Last night on P.I.D. Radio, Sharon and I discussed the move by Citi last week to raise interest rates on its credit card holders, even those with perfect payment records, to 29.99%.
Loraine Mullen-Kress carries a Bank of America credit card and religiously pays off her balance.
“Flawless credit,” she boasted.Yet now, her good credit habits could cost her. Earlier this month Bank of America started notifying customers like Mullen-Kress that they will be charged a new annual fee of $29 to $99.
“There is a big segment of their population that they will have never made money on, which is people who pay their bills on time every month,” said Ben Woolsey, Director of Consumer Research at CreditCards.com.
There are three possible responses: first, cut up the card and close the account (even though, incredibly enough, that counts as a negative against your credit score!); second, grumble but keep the card and continue making payments; and third, charge the card up to the limit and then default.
I don’t think the $99 fee will push many people to take the third option, but I wouldn’t be surprised at all to see a fair number of Citi’s customers stick it in the company’s eye.