Millions of credit card holders feel the crunch as interest rates soars

Millions of credit card holders are being squeezed by the highest interest rates in more than a decade, according to new research.

Despite the Bank of England’s base rate being at 0.5 per cent, average credit card interest rates have risen to 18.8 per cent.

Experts said that card providers were passing on the cost of an increase in defaults caused by rising unemployment and bad debts. The charges were also a consequence of tighter Government regulation.

Any credit card holders with a £5,000 debt, and who pay off the minimum 2.5 per cent each month, will repay on average £2,289 more than three years ago.

The last time interest rates hit today’s levels was in 1999, when the base rate was 6 per cent.

Borrowers who became used to switching their debts between cards promising 0 per cent introductory offers have been affected by a sharp tightening of lending critera. Figures from the UK Payment Association found that around half of all applications for credit cards were rejected last year.

Read moreMillions of credit card holders feel the crunch as interest rates soars

Citigroup Is In Serious Trouble

Citigroup’s “Hail Mary Pass”: How To Know Citigroup Is In Serious Trouble


citigroup

Citigroup is in serious trouble. It’s easy to tell by what they are doing.

Inquiring minds note that Citi Abruptly Shutting Down Gas-Linked Credit Cards.

Citi (C) is abruptly shutting down credit cards linked to gas station partners.

The bank is offering few details:

The bank said in a statement it “decided to close a limited number of oil partner co-branded MasterCard accounts.” That includes not only Shell, but Citgo, ExxonMobil and Phillips 66-Conoco cards.

The close date was Wednesday, and letters were sent out Monday to customers informing them of the change, a Citi spokesman said. The bank would not say how many cards were shut down or how much available credit they represented.

In a followup article the Business Insider notes ….

Citi Jacks Credit Card Rates To 29.99% On Unsuspecting Customers.

Yesterday, we reported on how scores of people across the country had found their gas station-linked credit cards from Citibank had been canceled.

One reader, Rachel, emailed us and explained her frustration.

I received two letters by mail from Citibank yesterday. One said that because I always paid my account on time and that I was such a great customer they were increasing my credit limit. The next letter I opened stated that Citibank was raising my interest rate from the current 18.99% to 29.99%.

My husband and I have good credit and are making a genuine effort to get out of debt by purchasing next to nothing on credit.

While I am ashamed to admit this to you we owe $25,000 to Citibank, our choices at this time are very limited. I have made some calculations and in order to pay the balance before they forcibly close my account, my husband and I must make payments of $1400 per month, this is a substantial increase from the minimum balances they require of $665 per month. I have not opted to pay Citibank the 29.99% interest. …

Now admittedly having a $25,000 balance is a sign of a problem. On the other hand, the account seems to be in good standing, so let’s dig further.

Citigroup Pressure Builds

Read moreCitigroup Is In Serious Trouble

Citibank Closed Credit Card Accounts Without Warning

Citi closes gas-linked MasterCards without warning

citibank

NEW YORK (AP) – Shannon Burdette tried to pay with her Shell Mastercard after filling up her gas tank this weekend but found the card rejected.

Confused, she called the customer service line on the back of the card, issued by Citibank, and was told the account was closed because of something that appeared on her credit report. But when the Sykesville, Md., resident got a copy of her credit report online, the only negative thing she saw was “closed at credit grantor’s request” on the Shell MasterCard account.

“They said there was a routine review,” said Burdette, who maintained that she and her husband, Brian, used the card regularly and always paid the bill on time.

Burdette isn’t alone. People across the country have been reporting similar experiences in postings on various consumer Web sites.

Citi confirmed the basics. The bank said in a statement it “decided to close a limited number of oil partner co-branded MasterCard accounts.” That includes not only Shell, but Citgo, ExxonMobil and Phillips 66-Conoco cards.

The close date was Wednesday, and letters were sent out Monday to customers informing them of the change, a Citi spokesman said. The bank would not say how many cards were shut down or how much available credit they represented.

Read moreCitibank Closed Credit Card Accounts Without Warning

US credit card defaults up, signal consumer stress

And now the credit card crisis. Who will bailout the US consumers?

“The defaults are a wake-up call for those expecting a V-shaped recovery.”

V-shape recovery? There is no recovery:

Job Losses: The Scariest Chart Ever


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American Express and MasterCard credit cards are shown in Washington June 25, 2008. (REUTERS)

NEW YORK (Reuters) – Bank of America Corp and Citigroup Inc customers defaulted on their credit card debts in August at the highest rates since the onset of the recession, a sign that the banks’ consumer lending woes are far from over.

The trend was echoed among most other major credit card issuers, dashing optimism sparked when many banks and specialty finance companies reported lower default rates for July.

Read moreUS credit card defaults up, signal consumer stress

Hacker (Ex-US Secret Service) charged with biggest ever US credit card fraud

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A hacker who had once worked with the US secret service has been charged with the biggest credit card identity theft ever recorded in the US.

Albert Gonzales, 28, of Miami, and his accomplices, allegedly stole at least 130 million accounts from big retail companies.

Gonzales is accused of working with two unidentified Russian conspirators to hack into the databases of retail chains, and then selling the information around the world.

Read moreHacker (Ex-US Secret Service) charged with biggest ever US credit card fraud

US: Consumer, Celebrity Bankruptcies Rise 34%, May Hit 1.4 Million

More green shoots!


Aug. 10 (Bloomberg) — Consumer bankruptcies show no sign of abating after rising more than a third this year and may hit 1.4 million by Dec. 31 as jobs are lost and loans are harder to get, according to the American Bankruptcy Institute.

More than 126,000 consumers filed for bankruptcy in the U.S. last month, 34 percent more than in July 2008, the ABI said in its latest report on Aug. 4. The increase came after a 36.5 percent rise in personal bankruptcies nationwide in the first six months, to 675,351, according to the ABI research group, which interprets data collected by the National Bankruptcy Research Center.

“Rising unemployment on top of high pre-existing debt burdens is a formula for higher bankruptcies through the end of this year,” ABI Executive Director Samuel Gerdano said in a statement. The group, composed of lawyers, accountants, bankers and judges, is based in Alexandria, Virginia.

Debt problems don’t stop with sub-prime borrowers. Celebrities who filed for bankruptcy in July included movie actor Stephen Baldwin, who sought protection from creditors after lenders began foreclosure procedures against his home. Lenny Dykstra filed for Chapter 11 bankruptcy in a petition that says the former Major League Baseball All-Star owes between $10 million and $50 million.

Read moreUS: Consumer, Celebrity Bankruptcies Rise 34%, May Hit 1.4 Million

U.S. credit card defaults rise to 20 year-high

The economic crisis has only just begun.

Meredith Whitney, one of Wall Street’s best known and most bearish bank analysts, estimates that Americans’ credit card lines will be cut by $2.7 trillion, or 50 percent, by the end of 2010 — and fewer Americans will be offered new cards.

Related article: Meredith Whitney: Credit cards are the next credit crunch (Reuters)


* AmEx and Citi perform worse-than-expected – analysts

* JPMorgan and Capital One outperform expectations

* Default rates seen over 10 percent by year-end

NEW YORK, March 16 (Reuters) – U.S. credit card defaults rose in February to their highest level in at least 20 years, with losses particularly severe at American Express Co (AXP.N) and Citigroup (C.N) amid a deepening recession .

AmEx, the largest U.S. charge card operator by sales volume, said its net charge-off rate — debts companies believe they will never be able to collect — rose to 8.70 percent in February from 8.30 percent in January.

The credit card company’s shares wiped out early gains and ended down 3.3 percent as loan losses exceeded expectations. Moshe Orenbuch, an analyst at Credit Suisse, said American Express credit card losses were 10 basis points larger than forecast.

In addition, Citigroup Inc (C.N) — one of the largest issuers of MasterCard cards — disappointed analysts as its default rate soared to 9.33 percent in February, from 6.95 percent a month earlier, according to a report based on trusts representing a portion of securitized credit card debt.

Read moreU.S. credit card defaults rise to 20 year-high

Meredith Whitney: Credit cards are the next credit crunch

(Reuters) – Prominent banking analyst Meredith Whitney warned that “credit cards are the next credit crunch,” as contracting credit lines will lower consumer spending and hurt the U.S. economy.

“Few doubt the importance of consumer spending to the U.S. economy and its multiplier effect on the global economy, but what is underappreciated is the role of credit-card availability in that spending,” Whitney wrote in the Wall Street Journal.

She said though credit was extended “too freely over the past 15 years” and rationalization of lending is unavoidable, what needs to be avoided was “taking credit away from people who have the ability to pay their bills.”

Whitney said available lines were reduced by nearly $500 billion in the fourth quarter of 2008 alone, and she estimates over $2 trillion of credit-card lines will be cut within 2009, and $2.7 trillion by the end of 2010.

“Inevitably, credit lines will continue to be reduced across the system, but the velocity at which it is already occurring and will continue to occur will result in unintended consequences for consumer confidence, spending and the overall economy,” Whitney said.

Currently, there is roughly $5 trillion in credit-card lines outstanding in the U.S., and a little more than $800 billion is currently drawn upon, she said.

“Lenders, regulators and politicians need to show thoughtful leadership now on this issue in order to derail what I believe will be at least a 57 percent contraction in credit-card lines,” she said.

Read moreMeredith Whitney: Credit cards are the next credit crunch

The Credit Card Debt Crisis: The Next Economic Domino

Don’t forget another crisis, that will be much bigger than the subprime mortgage crisis:
Mass Retail Closings: About 220,000 stores may close this year
Interview with Gerald Celente: 2009 – The Worst Economic Collapse Ever (02/10/09)
Retailers may close 73,000 stores; Wave of store closings, bankruptcies and takeovers


Hot on the heels of the banking crisis, the employment crisis, and the mortgage/foreclosure crisis, the country is on the verge of experiencing a credit card crisis.

According to the Federal Reserve, the total outstanding credit card debt carried by Americans reached a record $951 billion in 2008 — a number that will only climb higher as more and more people reach for the plastic to make ends meet. What’s more, roughly a third of that is debt held by risky borrowers with low credit ratings.

Related article:
American Express paying card holders to close their accounts
(Reuters)

Credit card defaults are on the rise and are expected to hit 10 percent this year. This will obviously drive many banks closer to failing their stress tests — but it will have an even greater impact on the lives of people who find themselves sinking deeper and deeper into debt.

Read moreThe Credit Card Debt Crisis: The Next Economic Domino

American Express paying card holders to close their accounts

NEW YORK (Reuters) – American Express Co, battered by mounting credit card losses, is offering $300 to a limited number of U.S. card holders who pay off their balances and close their accounts, the company said on Monday.

“We sent the offer out to a select number of card members,” said Molly Faust, a company spokeswoman. “We are looking at different ways that we can manage credit risk based on the costumers overall credit profile.”

The company did not say how many card holders would receive the offer and did not disclose the total of their card balances.

Read moreAmerican Express paying card holders to close their accounts