A new word is now being introduced to the English lexicon: rate-jacking. This refers to the process by which companies that issue credit cards can jack-up rates dramatically at any time. This practice is hitting consumers hard in the United States. According to CNN:
(CNN) — It arrived in Rich Stevens’ mailbox a few weeks ago: the notice that Citibank had “rate-jacked” the Visa cards belonging to him and his wife.
“In my case, from 9.5 percent to 16.99,” the 54-year-old nurse from the Long Island hamlet of Merrick, New York, told CNN. And his wife’s rate zoomed from 7.95 percent to 16.99 percent, he said.
Stevens said he did not know why the rates had soared; his credit rating is great.
But, like thousands of other credit card customers around the nation, he has been notified his rate is skyrocketing.
“It almost borders on loan-sharking, from my perspective,” he said.
In the blogosphere, writers are livid at the instant rate hikes — called “rate-jacking.”
Citigroup seems to be the target of most bloggers’ venom — partly because Citigroup issues so many credit cards and partly because Citi began sending the notices at about the same time it was getting a $20 billion, taxpayer-financed government bailout.
No one at Citigroup would talk on camera to CNN about the matter. Instead, the company issued a written statement, which said: “To continue funding in this difficult credit and funding environment, Citi is repricing a group of customers.”
Citi told CNN that anyone unhappy with the new rates can opt out and continue paying the lower interest, but they must close their account when their card expires. It’s all in the fine print.
The best precaution for consumers it to wean themselves off credit. Become frugalists and pay off those credit cards. Keep zero balances and get rid of surplus cards. The quicker you can pay down and pay off your debt, the less you will be at the mercy of banks and others and their rate-jacking.