Makes sense as long as they can afford to piss off customers, like me, who manage money well. Hope they don’t want to cross sell me a mortgage loan or any other product, though. 'Cause I’m not buying.
This may be why this is still in the trial stage: they’re trying to figure out whether it’s worth it across the business, not just the CC division.
I guess I can see your point. Hopefully they wouldn’t charge the fee if there is no activity on the card in the given month.
You seem to be forgetting the part where the OP entered into a contract with Citibank to accept their credit card with a certain interest rate and no annual fee, a contract which Citibank is now unilaterally changing. If Citibank did not think they could make money on the card as it was issued, they were not coerced into offering the terms they did. There is no reason to believe that anything has changed so that Citibank is now losing money on a card they were previously making money on - quite the opposite, in fact, thanks to historically low interest rates.
What is actually happening is that Citibank made poor lending decisions, giving excessive credit to those who turned out not to be able to afford it, which was the natural outcome of credit algorithms designed to try to get people to carry just as much of a balance as they could tolerate without defaulting, and which did not consider the risk of an economic downturn.
I trust that you wouldn’t be as supportive of your bank if it decided to either jack up your mortgage rate or charged you a monthly fee for not accruing the late fee, due to them losing money on defaults.
People who pay their balances monthly and pay no interest charges are not good customers…and if they are (because of other business with the bank), they can get the charges dropped easily.
Dammit, missed edit again
Voyager, most likely the original contract, which the OP was not coerced into signing, also allows for changing some terms, like this one. If those terms are not there, then the OP has a legitimate case against Citibank.
I have a fixed-rate mortgage with no provisions for rate increases nor any pre-payment penalties after 5 years.
I piss and moan about bank fees and gouging too. It’s just that this one, I understand. They are trying to cull unprofitable customers, and as I said, I have no problem with that.
Easily? Apparently you have never dealt with customer service. How is Ashwin in India (a.k.a. Chris), who is only working for an external vendor for one small department of (for example) Citi, going to have access to information about my other products and the authority to drop the charges based on this information? Nah, Ashwin would attempt to transfer me up the line and I would have to wade my way through the maze of customer service departments, dropped calls, dead-end voicemail, etc., etc. Screw it. I would rather avoid (for example) Citi products altogether. And… given that I do have good credit because of my good money management, plus new-found motivation to drop anything having to do with (for example) Citi, I can now keep an eye out for good offers and rates to refinance my Citi mortgage with someone else at the first possible opportunity. Eh, I was too lazy to bother before, but now, I hate Citi with the heat of a thousand splendid suns and I’m motivated!
By the way, something very similar to this scenario has happened to me, and I did cancel my card and refinance my mortgage. So, yes, people really do this. Don’t underestimate the power of being pissed off or feeling screwed over to light a fire under someone’s ass.
Defending credit card companies, telemarketers, and mosquitos, and other bizarre messageboard phenomena.
Then you are not a good customer. A good customer walks into the branch, where the manager knows his name. He asks the manager, “What is this charge?” The manager takes one look then makes the calls himself to get it off.
That’s the good customer.
For the record, I’m a customer who would talk to Ashwin.
MOIDALIZE, I’m only pointing out one misplaced rant about credit card companies. I’m not defending every shitty practice of theirs, and they have plenty of shitty practices. Look at the Credit CARD Act above - that’s a litany of shitty practices that are being stopped, as the issuers look for new ways to gouge and mislead customers. All I’m saying is that the OP’s complaint isn’t one of them.
ETA: I also dumped Citi about a year or so ago for truly shitty customer service.
I am one of the deadbeats and have no problem with CITI doing this, I will take my business elsewhere. The amount I charge on my C.C. they are certainly making a profit off of me, even with paying my bills in full. CITI is taking a chance that enough people will stick around to make it a worthwhile move. Most of us deadbeats don’t think like that though. We have no brand loyalty and will not pay annual fees is fee free cards are available at other banks. If all banks begin to charge annual fees, we will stop using C.C.
Who the fuck has time to walk into a bank branch during banking hours?
Christ, I hate retards who argue like this, pedantically explaining the concept of for-profit business. Thank you for that, it really added a lot to the conversation. :rolleyes:
Here’s the thing: I pay my balance off every month. I fully recognize that I am taking advantage of the current credit card business model, which works pretty much like a Vegas casino: get enough people to put as much money as possible on the card and, by the law of averages, even if some of them make money on the deal, you’re going to come out ahead when the rest of them get behind on their payments.
The reason this is a stupid move on Citibank’s part is the same reason it would be a stupid move for the Bellagio to initiate a cover charge to enter their casino. The fact that they don’t make any money off me when I walk through and look at the Chihuly glass and then leave is immaterial – in addition to irritating the lookie-loos, they’ll drive away enough potential gamblers that it’s a terrible strategy. At some level, you’ve got to maintain the illusion that you’re providing value to customers and not just trying to milk them in any and every way you can.
Charging a fee for using a credit card as designed and paying on time is a bit like telling the fat guy at the buffet that he’s “cut off” when he tries to go back for his tenth plate of sirloin tips. You can understand *why *they do it, but they still come off looking like dicks, and will probably lose a customer forever.
Although I probably contributed ten lifetimes of unnecessary finance charges and fees back in my young, irresponsible days, these days I pay off the balance each month. AmEx hasn’t balked yet, but then we do pay an annual fee.
Now this, I agree with wholeheartedly. I was trying to avoid the analogy, but it is certainly better than the one in the post preceeding yours.
Obviously you don’t understand the concept, else you wouldn’t be making the argument that follows. Banks aren’t like casinos. Casinos expect winners to come in and walk out ahead of the game. Banks expect every account to be profitable. Sure, they throw some pennies on the chance they can build a good relationship and a relationship will be profitable long term, but if the relationship doesn’t turn profitable, they will either get rid of you, or turn it profitable*. Now if XYZ Bank can find a way to profit off of credit cards where people pay in full and XYZ doesn’t charge fees, they’ll have a competitive edge over Citi (or BofA or whatever). According to Jorge_Burrito, there must be a way to make an adequate return on investment after all the overhead of a credit card operation is accounted for just off of transaction fees, because he knows that they are making a profit on his account.** How Jorge knows, I’d certainly like to find out. It would help me negotiate rates with my bank (assuming that my non-Citi bank uses the same methods).
*This isn’t a discussion how shitty customer service kills the idea of a loss leader, like a student checking account.
**If someone has details on the transactions fees, specifically whether they go to Visa/MC, the bank, or are split, I’d like to know. I think they go to Visa/MC, which gives banks even more incentive to charge for accounts they are not earning money on.
ETA: Credit Card Transaction Fees for Small Businesses
That’s Visa/MC.
And to counter above, this site says the banks take the lion’s share of the fees, and that the fees are unregulated in the US and much higher than other nations. It says total merchant fees are $48 billion, so I would guess someone is making some type of profit somewhere. Either that, or banks really need to learn to lower processing costs.
The card issuing company is the bank that issues the card, not Visa/MC. Visa/MC take a cut as well though.
That’s not really all that much considering that credit card transactions in the US surely account for at least a trillion dollars a year.
Actually, that is exactly what it was. It seemed pretty obvious to me that was the point of the casino analogy: tacking on fees could cause you to lose potentially profitable customers as well (for instance, customers who think they’ll pay things off in full but end up not doing so, or even customers who do intend to pay you interest but are turned off by the potential fee in months they do not do so).
I expect that the banks still make a profit from people who pay their bills in full each month, so it potentially isn’t even as bad as a loss leader for them.
So, my opinion that a credit card company who imposes a monthly fee on the customers that pay their balances off in full is going to lose business to their competitors means I don’t understand the concept of “profit” and “making money”? Right-o.
I suspect you don’t understand what I’m bitching at you about. I have no problem if you want to argue the position that this is good business or an economic necessity for credit card companies nowadays given the changing credit market or whatever. But do it by making that case, not explaining to people that the goal of a business is to make money, which is a stupid and irritating thing to do.
Banks expect every account to be profitable, really? How do you account for the fact that they’ve been giving people 1-5% cash back on their purchases regardless of whether they pay their accounts off in full every month for the past decade? No, up to now, it’s been a numbers game (i.e. exactly like a casino) – they’ve been doing everything they can to entice people to use their cards because the more people they have, the more money they make on average. They couldn’t have given less of a shit about people like me who are gaming their system. The winners from these promotions are more than compensated for by the losers.
Now, the credit markets have changed enough that this model may not work any more, so they want/need to change the rules. As a consumer, I don’t give two tin turds about their bottom line. That’s their job to worry about. Mine is to get the best deal I can get from them. I feel no guilt that they make nothing in interest from me, and am scornful of any bank that thinks I’m going to pay a monthly fee while there still exist cards out there that don’t require one. I’m doubly scornful because I think it’s a bad business decision for them to do so, regardless of my own personal stake in the matter.
But, please, feel free to tell me some more about how banks “lend” money to people and get “interest” from those “loans”. That would be super interesting.
WAG: Quebec has laws against that kind of thing, but the other provinces don’t.
First, I agree with the first paragraph, as long as the competitors offer a better deal. And perhaps you do understand the goal of business is to make money, but if you posted in the thread before I did, I wasn’t talking to you. I was talking to the people who believe that banks will lend them money short term out of the goodness of the banks’ non-existent heart.
All across the banks’ operations (and just about every other industry too), every department has to increase their return on investment. Prior to a few years ago, when this idea first floated and some news articles started coming out about consumers whose credit card accounts were being terminated for this reason, the banks didn’t care.
And one of the articles I linked to said that rewards cards tend to have higher merchant fees. Someone (who is not the bank) always pays for the rewards programs somehow. Merchants are also trying to get fees capped; it might bring prices down or just increase merchant margins, but I think we both agree that the banks will then pass the lost revenue back onto the cardholder.
I don’t think it is credit markets in particular, I think the economy overall is causing companies to squeeze every nickel they can out of consumers. That’s why Jet Blue charges $7 for a pillow and blanket (ooo, but I get to keep it now), and McDonald’s around me have signs stating they’ll charge for “extra” condiments (without ever saying what constitutes extra). I’m not saying it is a good strategy. I’m saying it is an understandable strategy. People who use the cards and pay them off monthly are gaming the system, and someone in the bank thinks losing good will is worth closing the loophole. As 4 banks control 70% of the market, it will be hard to find deals. BofA is sticking its toe in the water to find out how the fees will play out, as is Citi. If it works for well enough for them, I expect all 4 of the big issuers to follow suit.
As for “not giving a shit” about people gaming the system, my semi-educated guess is that it has only been in the last decade that they’ve gotten the ability to datamine individual accounts to that level. So yes, it was a numbers game, but only because they couldn’t figure out how to fully maximize their side. In this, they can learn from casinos, as they are the best when it comes to maximizing revenue per patron. A bank’s business model does not allow for long-term unprofitable customers.
I am interested in how these fees will work. The OP states a monthly charge. In the past, banks were looking for accounts with a history of monthly use but no finance charges. This sounds like a fee to any account that presumably doesn’t carry a balance yet has use. They know they’ll lose customers, but someone figures that overall ROI will increase. The issuer has a profitability target it will try to reach, and I’m betting that corporate keeps increasing the targets, forcing the issuer to find more and more inventive ways of achieving them. (My firm does the same thing, making me wonder what planet the C-suite is on when the targets come down).