How Hard Is It to Transfer Credit Card Debt?

I forgot to talk about another MISH post that was interesting, regarding Citibank's (C) decision to jack credit card rates to 29.99% on a number of customers. My first thought is one of adverse selection - Citi's decision would force any sane person who has the ability to pay down their balance to find another card instead of paying Citi's usurious rates. Citi would then be left with nothing but a steaming pile of customers who cannot pay their bills, and who would presumably get disenchanted with their prospects of ever being able to cover 29.99% APR's, and try to find a way to walk away from their debts to Citi.

But then I had an epiphany - what if Citi is brilliant? What if they know that they have hundreds of thousands, if not millions, of customers who will be racking up increased defaults in the next 24 months, and thus increased losses for Citibank. The solution? Raise your rates so high that the customers are FORCED to transfer their balances to another bank's credit card!

Now, in order for this to be their brilliant plan, these customers would have to have the ability to transfer their debt elsewhere. I'm sure that 2 years ago this wouldn't have been a problem - but I have no idea how hard it currently is for someone who carries $5k to $20k in revolving credit card debt, while always making on time payments of at least the minimum, to transfer a balance to another bank's card.

Anyone? Thoughts? Is this a brilliant plan by Citi to force their at-risk cardholders into some other bank's arms like a hot potato?

Comments

[maverta:]

there are offers that allow someone to transfer a credit card balance but not as many as there were 2 years ago. in some cases, there are zero balance transfer offers that give you 6 to 9 months without any interest but these offers carry a 3% balance transfer fee. the offers are out there; just not as plentiful as they used to be.

Oct 27 07:00 AM

[un23pescao:]

The endgame is near for CC Companies and no one wants to be the the last to sit when the music stops. The problem is that it won't be easy to unload your Customer's unto your competition. There is just too much debt to unload and too few takers if any. Get ready for Round two of the credit crisis and pray there won't be a round three!

There isn't enough paper to print money on to overcome the mountain of debt we are under. An avalanche is the only natural outcome. But who wants to admit it first?

Oct 27 07:35 AM

[spbigger:]

Transfer fees have drastically increased. Rates for current minimum balance payments have drastically increased. Additionally, for the most part, the real issue for lots of folks seems to be the required minimum payment increase. Unless folks can pay more than the minimum,regardless of rates, the balance may never be paid and it might be best for the consumer to just take steps now and just walk away while they still have at least some resources. Folks should investigate the consequences of doing this within their own respective state in light of their income,age,assets,etc. Banks caused the problem, yet, They are dumping responsibility for resolution on their historically good customers doing away with past positive customer relationships. the Government supports the banks but disregards the consumer issues.

Oct 27 09:05 AM

[Smalltownba...:]

Good customers go away, those who are struggling now can't move and will now default. Citi loses, customer loses. Taxpayer loses because we bailed out these morons.

Oct 27 09:51 AM

[boisterousbob:]

They are following amex who did this 12 months ago. Amex even paid some customers to successfully close their accounts.

Oct 27 04:21 PM

[boisterousbob:]

That depends on who has increased rates. If they have increased rates correctly for those customers who were ultimately going to default anyway, then they will drive some of them to other banks.

So I would suggest it depends on how successfully the rate increases have been targetted.


On Oct 27 09:51 AM Smalltownbanker wrote:

> Good customers go away, those who are struggling now can't move and
> will now default. Citi loses, customer loses. Taxpayer loses because
> we bailed out these morons.

Oct 27 04:29 PM

[commoinsens...:]

all of the cc companies are raising rates on those who obvviously are having a hard time paying just the minimum, in the end they will create more defaults and we'll (The taxpayer) end up bailing out all these irresponsible banks again. wtf?

Oct 28 03:45 PM