Thursday, March 11, 2010

Citi to taxpayers: Thanks for the bailout, now pay up

The banking giant is showing its appreciation for a $45-billion infusion from the U.S. by slapping a $60 annual fee on many credit cards.

by DAVID LAZARUS, FierceFinance
March 09, 2010

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?

Not exactly.

"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.

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