Credit card firms pay some clients to close their accounts
NEW YORK -- If you've recently been offered cash from a credit card company to reduce your debt or close your account entirely, be forewarned: Your business may no longer be wanted.
"What the card company is saying is that right now we're playing nice, but if you don't take it, we might start playing hardball" by raising rates or cutting credit limits, says Justin McHenry, president of IndexCreditCards.com.
For an industry that makes money when consumers pile on debt and pay the minimum, the promotions are a telling sign of issuers' struggle to shed risk and clean up their balance sheets. In recent months, banks have also closed inactive credit card accounts or slashed borrowers' credit limits en masse.
McHenry says lenders are "desperately" trying to get as much money from consumers as possible in case they default.
Issuers now consider any open line of credit risky. That's because even responsible borrowers with good credit could suddenly find themselves out of a job or in financial distress as the economy spirals downward. At a time when more borrowers are juggling bills, issuers hope their promotions will put them first in line to be paid, says Megan Bramlette, managing associate at Auriemma Consulting Group.
Citigroup spokesman Samuel Wang declined to discuss its promotion. But Wang says it offers card borrowers facing financial difficulty a variety of programs to assist with their debt.
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