PERSONAL FINANCE & MANAGEMENT SERIES

PFMS01-09

CitiCard "Reduces Exposure" - To Responsibility!

Be sure to check your account to see if you're a victim!

In my first Personal Finance & Management Series blog, I'm discussing a disturbing event that happened to me right before the new year.  It deals with credit cards.  Dave Ramsey...its why you do what you do and why you invented the "plasectomy" (click on the link for an example).

Let me begin with some background.  I have several credit cards.  I don't use them very often.  When I do use them, I pay the balance immediately.  My credit limits are comfortable due to my responsible credit card use.  

Fast forward to late December.  I logged onto my CitiCard account website to conduct a regular glance at my account.  I had not used the card in a couple of months and wanted to check to see that everything was as it should be - zero balance.  I expected to see everything in order.  My home-account page poped up...and to my surprise -and quickly to my disgust, I realized my credit limit had been reduced by $8000!! As you might imagine, I was in shock.  I had read an article several months before explaining that credit card companies would begin reducing their customers' credit limits to reduce their exposure to defaults, etc.  But I never thought that a responsible customer like myself would be one of the victims.

I had not received any notice that my limit would be reduced.  I was lucky to check because one large purchase could have put me over my limit without my knowledge, which would have caused major problems. 

I called CitiCard to investigate.  The representative was very helpful and informative.  She explained that CitiCard had reduced the limits of something like 500,000 of its card customers...500,000!!!!  All to reduce its exposure to potential defaults.  She explained that one customer's $700,000 limit was reduced to $3000!!!  That's incredibly ridiculous!!!  I explained that I'm a responsible customer and earned my credit limit through responsible use of my credit card.  What possible negative exposure did I represent to CitiCard?  She answered that the reduction of my limit was likely due to my limited use of the card and, therefore, fit with my limited purchasing habits.  "Great," I said, "So, I'm getting punished for good management of my finances!"  

I asked whether the credit limit that I earned could be restored and she said that she didn't have the authority to do that.  I would have to make an official request for an increase in my limit.  Thus, I would have to take another potential hit on my credit score just to get back the credit card limit that I earned and deserve! An aside: If you don't know, when your credit limit is reduced, your credit to debt ratio is reduced thus reducing your credit score.  Luckily, I didn't have a credit card balance, so my credit score was likely not affected.  But I have no doubt many CitiCard customers out there are suffering from lower credit scores as a result of CitiCard's actions.

I also spoke with a supervisor who basically said the same things as the representative. She said I should have gotten notification in the mail.  But, I had not received such a letter.  That is, until around January 7th, more than a week after the fact!  The letter was not dated of course! (Interesting, CitiCard can't even manage the distribution of its mail notifications and yet it's punishing me for perfect management of my credit card.) The letter starts by stating, "Citi...is always ready to serve you and your business credit needs."  (That's a bunch of nonsense.)  The letter went on to say that because I was only using a small portion of my credit line, Citi "adjusted" my credit line "based on [my] spending history."  Then Citi has the absolute nerve to say: "We understand circumstances change and the credit line on your credit card may have exceeded your current expense management needs."  That's a bunch of s**t!!!  I managed my needs just fine without Citi's interference.  Basically, Citi is saying that because I don't spend thousands of dollars every month and carry thousands of dollars of continuing balance, that my limit exceeded my management.  How about I make that decision!!!  How about reward me for being responsible!!!  

Speaking of responsibility, I can't help but think that Citi's (the parent company) own irresponsibility is at the heart of CitiCard's actions.  Citi is the one that lost tens of billions of dollars in the past year or so.  Citi is the one loosing millions of dollars every day. Citi is the one that has had to lay off over 50,000 likely innocent victims, uh, I mean, employees, of its irresponsibility.  Citi is the one who can't manage risk.  Citi is the one who needs the government to keep its lungs breathing and it's heart pumping. Citi is the one with a plunging stock price...down 88% from its 5-year high (at the time of this blog) to about $6.75 a share!  At that price, you could mistake Citi for an American car company.  Poor shareholders.  But I digress...

Going back to what the CitiCard representative was saying. CitiCard is attempting to reduce its exposure to risk and credit card defaults.  What it has really accomplished is that it has reduced its exposure to one of its more responsible customers.  That's a hell of a business strategy they got over there.  (Do they teach that on the first day of Harvard Business School, or the second day?)

In any case, CitiCard succeeded.  I am no longer using my CitiCard for any purchases, ever!  As I wrote to Dave Ramsey's email, I am cutting the card up.  I plan to perform Dave Ramsey's famous "plasectomy" (click the link for an example). My video will be sent to Dave Ramsey, hopefully to be featured on his Fox Business show of the same name.  I also plan to post the video on Back To a Nutshell for all to see!

Stay tuned...