Citi starts closing Mastercards without warning

People across country reporting their cards linked to gas companies denied

NEW YORK - Shannon Burdette tried to pay with her Shell Mastercard after filling up her gas tank this weekend but found the card rejected.

Confused, she called the customer service line on the back of the card, issued by Citibank, and was told the account was closed because of something that appeared on her credit report. But when the Sykesville, Md., resident got a copy of her credit report online, the only negative thing she saw was "closed at credit grantor's request" on the Shell MasterCard account.

"They said there was a routine review," said Burdette, who maintained that she and her husband, Brian, used the card regularly and always paid the bill on time.

Burdette isn't alone. People across the country have been reporting similar experiences in postings on various consumer Web sites.

Citi confirmed the basics. The bank said in a statement it "decided to close a limited number of oil partner co-branded MasterCard accounts." That includes not only Shell, but Citgo, ExxonMobil and Phillips 66-Conoco cards.

The close date was Wednesday, and letters were sent out Monday to customers informing them of the change, a Citi spokesman said. The bank would not say how many cards were shut down or how much available credit they represented.

But unlike the bank's move to shut down its Home Depot cards, Citi did not discontinue the sale of these cards altogether. It is still accepting applications, promising rewards like 3 percent cash back on fuel purchases and 1 percent cash back on other spending.

No law, including the Credit CARD Act that has started to take effect, prevents banks from closing down credit accounts without warning. Credit card issuers all maintain the right, typically listed in the fine print on credit card agreements.

Citi would not say why the cards in question were shut down, issuing a statement that said only it continuously evaluates its products.

"It is kind of an extraordinary action, but these are extraordinary times," said Ben Woolsey, director of marketing and consumer research for CreditCards.com.

He noted that Citi is not the healthiest bank. In fact, Citi posted $8 billion in consumer credit losses for its third quarter last week, including both mortgages and credit cards. Like many banks with big consumer lending portfolios, Citi is expecting defaults on credit cards to rise in coming months. Credit card delinquencies typically track the unemployment rate, which is at 9.8 percent and is expected to top 10 percent soon.

Analysts noted following the earnings report that Citi has sharply reduced its outstanding credit to consumers.

A card being closed may, but does not always, damage a person's credit score.

Such scores, which lenders use to determine if you're a good credit risk, take into account a series of factors, including how long you've had credit accounts, your payment history and the balance versus available credit.

It could be that last factor that hurts consumers most, said John Ulzheimer, president of educational services for Credit.com. If a consumer had a high credit limit on the closed account, and that credit is no longer available, it could alter the "utilization ratio" for the person's remaining credit. If another type of credit carries a high balance, the loss of the credit line could push down their score.

What should you do during Recession?

1. Minimize Debt
   Most of us are overstretched ourselves with credit cards and other debt. These bills now haunt us every day. One hast to reduce this expensive debt, even before saving for retirement or investing in the stock market. One smart strategy is to take advantage of much lower gasoline prices. One year ago, gas cost more than $4 a gallon in much of the country. Today, it's less than half that. You should devote the money you save to eliminating your credit-card debt.

2. Set a Budget
   Plan and set a budget, measuring exactly what you spend and looking for ways to save money. Most of us are eating out more than you appreciate or spending too much on a cup of coffee. Budgeting is a lost discipline for many people and one that should be rediscovered. If you are just getting started on developing budgeting discipline, talking with others who are doing the same can help make it easier.

3. Inflation
   Currently, inflation is a relative non-issue, and most commentators -- not to mention the Federal Reserve -- believe that it won't become a problem anytime soon. For that reason, it's smart to have a portion of your fixed-income investments in Treasury inflation-protected securities, or TIPS. These bonds are backed by the U.S. government, like normal Treasury’s, but also have built-in protections that boost returns to account for inflation.

4. Stock-Market
   In Recent times, investing in stock market has been a roller coaster. Outside of your retirement account, be sure to maintain a diversified approach among stocks, bonds and cash. A good rule of thumb is to use your age as the percentage of assets you should have in safer bond investments. Thus, if you are 50, you would be split 50-50 between stocks and bonds. If you want to be more conservative, you'd carve back some of the stock exposure and leave it in cash. Even with the recent run-up in stocks, you still might have a larger-than-usual chunk of your assets in bonds these days, because bonds did well last year and have remained solid this year. If that's the case, rebalancing toward stocks makes sense, especially with their prices so low.

5. Protect What You Have
   One of the lessons of the past few years is that the stock market and your home are not ATMs. They are assets that can rise and fall. Having a strategy to protect your gains is prudent in these challenging times. Along with diversification of assets -- stocks, bonds, cash -- maintain diversification in the stock market, as well. Buy broad, low-fee index funds, rather than individual stocks, to lower your exposure to risk. And maintain a rainy-day fund in safer places, such as TIPS, certificates of deposit or highly rated municipal or corporate bonds. A good rule of thumb is to have a reserve of six months' earnings in case of a job loss.

For information regarding how you can minimize your debt, cutting the balance to 50-70%, debt settlement, debt reduction and debt negotiations, contact debtfreeafterall.com.

They can help you save money during this tough economic crisis. Call 1-877-208-6770 for help!

Written by Naz