Citi to taxpayers: Thanks for the bailout, now pay up
Vikram Pandit, chief executive of Citigroup Inc., thanked taxpayers the other day for coming to his company’s rescue with $45 billion in bailout cash.
“Citi owes a large debt of gratitude to American taxpayers,” he told lawmakers in Washington. The bailout money, Pandit said, “built a bridge over the crisis to a sound footing on the other side.”
And how is Citi expressing its gratitude for that act of taxpayer generosity?
It’s slapping a $60 annual fee on many credit cards that previously had no fees and telling customers that if they don’t like it, tough patooties. They can pay off any outstanding balance and take their business elsewhere.
Man, if that’s Citi when it’s grateful, I’d hate to see the company when it’s cheesed.
Bank of America Corp. unleashed its own annual fee of as much as $99 on some cardholders last month. JPMorgan Chase & Co and Wells Fargo & Co. both say they have no plans to introduce such fees, but it’s probably just a matter of time.
Citi isn’t saying how many of its millions of cardholders nationwide are subject to the new fee, which takes effect April 1.
But it is saying that if you still want to keep your account, and if you want to avoid the fee, you’ll have to run up at least $2,400 a year in purchases using that credit card.
Samuel Wang, a Citi spokesman, said imposing the fee was “necessary given the increasing cost of doing business.”
He also patted Citi on the back for “taking a very different approach than others in the industry by communicating these changes in a clear way.”
Wow -- communicating clearly with customers. What will the banking industry think of next?
Lake Forest resident Betty Atwell was among those who recently received notice that one of her four Citi cards will be hit with the annual fee. It’s a card she’s had for more than a dozen years and one that she seldom uses.
“These days, I only use cards that have some kind of reward, such as giving cash back,” Atwell, 66, told me. “This card with the new fee doesn’t have any rewards.”
So close down the account. Easy, right?
“My concern is that my credit score will be affected if I start canceling cards with annual fees,” Atwell said. “Right now it’s Citi, but you just know the other banks will follow.”
She’s right to be concerned.
Linda Sherry, a spokeswoman for the advocacy group Consumer Action, said canceling an older card that reflects long-term creditworthiness can indeed have an impact on your credit score.
“You might see your FICO score go down by as much as 100 points,” she said.
FICO scores range from 300 to 850. A score above 700 is typically seen by lenders as a sign of good financial health. Anything below 600 represents a greater risk for lenders and can result in higher interest rates.
This is where lenders have people between a rock and a hard place. Yeah, you can close down your account, but your credit score might get dinged in the process.
Sherry said cardholders in this position should take a long view and figure that even if they lose FICO points for canceled cards, they’ll gradually earn those points back with a good credit record.
“Unless you’re going to be buying a house in the next year or so, you should probably just let the suckers go,” she said. “You don’t always need a perfect credit score.”
And if you’re a Citi customer, you at least can take solace that the company appreciates your helping hand when times were rough.
Just don’t expect anything else in return.
Last week’s column on sky-high earthquake insurance premiums and deductibles drew plenty of responses from homeowners throughout California saying they too are either paying through the nose for coverage or can’t afford protection.
It also prompted a sharp reaction from the state Department of Insurance, which said my tale of woe about Reseda resident Yves Didier wasn’t unique.
Didier, 45, had to drop coverage after his insurer, Northern California-based GeoVera Insurance Co., nearly tripled his annual premium to $7,100 and raised his deductible to more than $100,000.
GeoVera’s CEO, Kevin Nish, told me that the rate hike was fair and had been approved by the Department of Insurance.
Jason Kimbrough, a spokesman for Insurance Commissioner (and gubernatorial candidate) Steve Poizner, acknowledged that officials did give the go-ahead for a change in the way GeoVera values insured properties.
“But I don’t think anyone who dealt with the settlement anticipated rate increases of 200% or 300%,” he said. “That’s a pretty astronomical jump.”
Kimbrough said that “dozens of rate-related complaints” have been received from GeoVera customers. He declined to be more specific because the Department of Insurance is still tallying the complaints. Kimbrough said the agency’s options include negotiating rate reductions on behalf of customers.
GeoVera’s Nish responded that the possible tripling of some customers’ premiums had been disclosed in advance to state officials.
“We remain confident that our rate filing was implemented properly,” he said.
David Lazarus’ column appears Tuesdays and Fridays. He also can be seen daily on KTLA Channel 5. Send tips or feedback to firstname.lastname@example.org