Nov 21 2008
Citigroup Inc. said Friday it is raising rates for some of its U.S. credit card customers after losses in its global card division skyrocketed.

A spokesman declined to say how many cardholders would be affected by the changes or if interest rates would be cut on some accounts. Citigroup (nyse: C - news - people ) had 182.7 million open card accounts during the third quarter.

Earlier, The Wall Street Journal reported that Citigroup is telling some credit card customers that their rates are being raised by an average of three percentage points and that less than 20 percent of the bank's customers could be affected, citing a person familiar with the company's strategy.

The company has not repriced its Citi-branded cards in at least two years and it needs to make the changes because of "significant consumer credit deterioration driven by the mortgage crisis and rising unemployment," the spokesman said in a statement.

The move comes as the financial services giant looks for additional ways to return to profitability, including continuing to cut jobs under a previously announced plan. Citigroup is currently cutting 22,000 jobs worldwide. Through the end of the third quarter, it shed 12,900 jobs and it expects to cut the remaining 9,100 jobs over the next 12 months. Citigroup had about 352,000 employees at the end of the third quarter.

The downturn in the economy has led to rising defaults on all types of loans this year, such as credit cards. Credit losses in Citigroup's global card division rose to $1.59 billion in the third quarter from $1.05 billion during the same quarter in 2007, as more customers missed payments. Credit losses include loans written off as not being repaid. Overall, the card division lost $902 million in its card division during the third quarter. It earned $1.44 billion in the unit during the third quarter in 2007.

Customers will be able to opt out of the changes and instead use their cards until they expire. People who opt out can pay down balances under the old terms, the company said.

Source : http://www.forbes.com/feeds/ap/2008/11/14/ap5696932.html