So, of course, I woke up this morning to the news that Citi has received a bailout offer from the government. It’s yet another company that is too big to fail. This is a special bailout — different from the other bailouts that have come before — and features a strangely convoluted system of who absorbs losses.
Even as the taxpayers (you and me) prepare to pony up for the Citi bailout, Citi is levying what amounts to another tax against us: Dramatic credit card interest rate increases. Most customers, insists Citi will see an increase of *only* two or three percentage points. But some — even those with good credit and low balances — are seeing six or seven points of an increase.
Of course, while Citi was coming up with ways to stop bleeding money (cutting jobs, raising credit card interest rates, asking the government for a bailout, getting infusions from Saudi Arabia), the executives failed to consider cutting their own pay. The government says it’s going to cap executive compensation, but is vague on that subject.
At any rate, it is rather annoying that Citi is raising interest rates at this time. There is speculation that the Fed rate could go to 0%, and people are having enough trouble as it is — and we aren’t getting a hand-out from the taxpayers.
So, what does it mean when your credit card interest rate goes up? Mainly it means that more of your monthly payment goes to interest, and less of it goes to reducing principal. Which means that if you are trying to get out of debt, it’s going to take you a little bit longer.