Your credit squeeze : signs to look out for

A friend of ours had a credit card for more than 12 years with Citibank. It was an older card from student days with low-ish rate of interest, 9.4 percent — low when compared to the credit cards you have in your pocket now at anything from 14 to 29 percent.

The cardholder never made a late payment in all that time and usually cleared the balance to zero every month or, at worst, every few months. Then, in March, a relative passed away and pressures of travel and responsibilities caused a miss in the payment date by one day. The cardholder called and explained why the monthly payment would be late the next day and the CitiVisa representative logged the family bereavement on the record, waiving the late payment fee of $30. The card was paid off (a total of $350). All seemed well.

Citibank canceled the card. They never properly informed the cardholder (they said they mailed a notice but no e-mail notice). As the supervisor in customer relations said yesterday “under the conditions of the card, we can cancel the card at our discretion.�

When pressed for a reason why, the supervisor explained that this card was not the only one as they were “canceling the product� (meaning student Visa cards with fixed interest rates) in favor of credit cards with higher rates. They used the family bereavement as an excuse to cancel the low interest rate card. The joke is that in the mail there was an offer from Citibank for a new Visa card at 18 percent.

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Part of the problem here is that the cardholder — as most of us do — had switched to electronic card billing, notification and paying. But the card companies have a loophole — they say they cannot tell you anything important online or by e-mail. They can tell you that you need to pay, but they will not tell you they are canceling electronically. It’s in the fine print (somewhere on page 45?).

In fact, online the CitiVisa account looked in order. Balance — zero. Available funds — 100 percent. All seemed fine in conversation with the Citibank rep.

“Why doesn’t it show online that you canceled the card?� The answer was perfect slight of hand by the big banks: “We only send those notices in the mail. You must have received it. It is your responsibility to read your mail.� Proof of delivery? None. Volume of junk mail from Citibank? Weekly, sometimes daily. Hide in plain sight, fool the customer.

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What’s the solution? You must do three things as soon as you can.

1. Make sure you tell the credit card companies that you want electronic notices and paper billing. Always make them do more work, always read every mail item from a credit card company, even if it looks innocent.

2. Set up automatic payment for the minimum amount two days before the billing cycle (careful, sometime they change those billing dates to catch you out, making them a few days earlier). Then, if you want to pay more, you can send another payment. But this way you will know they had money and cannot cancel you to get a higher rate in place.

3. Switch from a huge Wall Street Bank to a local bank as soon as you can. Why? Because local banks have to live in your community and they cannot hide behind Wall Street walls, using taxpayer bailouts, sticking you with interest rates no one can sensibly afford.

Go and speak to your local bank, show them your credit card bills and ask if you can transfer them to a local credit card, and ask what the interest rates are. Chances are they will be more affordable anyway. And, as a bonus, you’ll be supporting your community at the same time.

Here’s the motto you need to remember. When it comes to most things we buy or use, especially banks, remember that the brand is no proof of quality. Quality is proof of the brand.

Mr. Riva observes national and world events from his home in Gila, N.M.