Citi Hikes Interest Rates on Sears Cards
August 18th, 2009 by Kenneth Long
Citibank has joined the ranks of other major credit card issuers by raising interest rates on its popular Sears credit card. Interest rates are being hiked for thousands of cardholders, many of whom have very good credit.
The increases have been quite substantial and are in direct response to two main causes. First, the recession has created a difficult economic environment in which credit card issuers are struggling to offset rising default rates by charging higher rates and fees to their paying customers.
Second, the CARD Act of 2009 has created a rush by credit card issuers to increase rates on existing balances while they still are able. The Act limits their ability to raise interest rates on previously charged balances, and this provision goes into effect February 2010.
In April and May 2009, a large number of Sears cardholders received notices that their interest rates werer going up from around 11% up to 21.4% APR. The announced increases in August are even higher, with rates increasing to US Prime Rate plus 21.99%. That means that rates are increasing to around 25.24% APR.
This increase is affecting more than just high-risk cardholders. A FICO score of 762 is generally considered to be excellent. Even though my Equifax FICO score exceeds 760, I was not spared from the increase. For the record, my Sears card balance is zero.
I could certainly opt out, however there would be little incentive to do so. The only reason that I keep the card is that I have held the account for more than 13 years which helps my credit score. Ten percent of each credit score is affected by the average length of time that accounts, both individually and collectively, have been maintained.
Even given the rate increase, closing the account would be a mistake. However, if an annual fee ever gets implemented, then I would most certainly be justified to close the account.
If you are facing higher interest rates on accounts that are carrying substantial balances, then you should consider speaking with a credit counselor. Make sure that you select a reputable organization that employs accredited counselors.
UPDATE
I contacted Sears Credit Card Services to inquire about the changes. The representative informed me that “all Sears Card customers are receiving a change in terms.” After further inquiry, the representative proposed a counter offer.
The counter offer was to keep the terms as is (17.24% APR) with no changes. How could I refuse?
In short, if you have received a change in terms, call to ask why and see if they have a counter offer that allows you to keep your account open. That way, you can avoid the changes without necessarily having to opt out which would necessitate account closure.
This entry was posted on Tuesday, August 18th, 2009 at 2:43 pm and is filed under Consumer Protection, Credit Cards, Credit Cards: Citibank. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
November 4th, 2009 at 11:32 am
I contacted Sears Credit Card Services to inquire about the changes and the counter offer was I could keep my 17% interest rate, but the account would be closed. How wonderful is that?
Otherwise, I need to accept the increase even though I have a 750 FICO. Even given the rate increase, closing the account would be a mistake.
You need to read the fine print!
November 4th, 2009 at 6:44 pm
Well, they are going to get a bankrupt from me. Lost my job, running out of unemployment, and they raise interest up to 25%. They deserve every default they get…
December 1st, 2009 at 8:55 am
I went from 9.99% to 29.99%..Same scenario..I have excellent credit, over 750 credit score, pay triple the minimum due and pay on time. Another “SLAP IN THE FACE” for the working class of AMERICANS who don’t expect something for nothing and are still PENALIZED as if they have “POOR CREDIT” or “NO CREDIT”.Sears will be next CORPORATION that will need BAILING out by OBAMA if these extreme APR’s continue!I can’t afford to pay this and get it paid off!!
January 6th, 2010 at 6:18 pm
RE: Karla
You would’ve only received a 29.99% APR if you defaulted on the account, i.e., even paid late by one cent or day.
March 17th, 2010 at 10:40 am
I have a Sears account and had a promo deferred interest no payments for year. This came with 14.24% rate. I intended to pay off but things came up and I decided to make montly payments instead. My first statement after the 1 year promo expired showed the interest rate went up to 25.24% and it was retroactive back to when the purchase was made. Is this legal? I can understand they are allowed to charge the higher interest from this point on, but can they charge the previous year at a higher rate then what was disclosed to me when I made the purchase?
March 23rd, 2010 at 2:33 pm
Dear Mike:
Unfortunately, you are responsible for the interest that they charged. The key is that interest on the account is “deferred.” As of February 20, 2010, they cannot raise the interest rate to a penalty rate unless you have missed payments as a part of your cardholder agreement. The Credit CARD Act stipulates exceptions to the prohibition from increasing rates on outstanding balances. One exception is if you had a stepped rate with terms disclosed in advance, such as 0% for 12 months. You will need to review the terms of the offer to see if the rate revealed to you at the time of the offer showed 14.24% or 25.24%.
January 22nd, 2011 at 5:55 am
When people rob banks they get arrested go to Prison for many years. We look at them like thug criminals, but when Credit card companies double the interest rate they act like they are your best freind with a smile on their face. When I pay of my Sears card I will 1) never ever shop at Sears. 2) Rip up the card. My interest rate was at 10 percent for 10 years then it is at 23.5 percent that is a 13.5 interest rate. 3) Sears has gone down hill from the mid 90′s, going to a sears looks like a flea market with electronics, F*** YOU SEARS! HOPE YOUR ASS GO BANK RUPT! F*** CITI BANK!
April 21st, 2011 at 3:43 am
[...] Citi Hikes Interest Rates on Sears Cards | Vision Credit Education … Aug 18, 2009 … This increase is affecting more than just high-risk cardholders. A FICO score of 762 is generally … I contacted Sears Credit Card Services to inquire about the changes. … [...]
June 20th, 2011 at 10:02 am
[...] But then some goon sticks his leg out and down I went. Ocwen’s reporting (incorrectly) that we were behind on our mortgage, caused our credit card companies to increase our interest rates. Sears CitiBank went up to 25%. When I called to beg them to lower it, and pointed out we hadn’t missed a payment, the customer service rep genuinely sounded sympathetic, but said there was nothing he could do. He said they had raised everyone’s rate. [...]
December 22nd, 2011 at 12:16 pm
No wonder people are in credit card debt. Each month, as long as you have a balance, you get charged 25.24% interest – that’s highway robbery!! And they aren’t willing to budge when you call to ask for a lower interest rate.