Citigroup closes unused credit card accounts due to a sharp increase in related business losses
Citigroup is closing unused credit card accounts to deal with customers defaulting on payments. The bank has also increased its ability to recover bad debts and reduced the credit limits of customers who do not use their credit cards. Citigroup's credit losses totaled $2.5 billion in the second quarter, higher than the same period last year. The bank has started to see a growing spending gap between high credit score customers and low credit score customers. This move could be a sign of future actions by other major banks
As more and more customers delay repayments, Citigroup is closing unused credit card accounts.
Citigroup's Chief Financial Officer Mark Mason stated in a phone conference with reporters that the bank has also increased its ability to recover bad debts, as part of its loss management measures. Other measures include reducing the credit limits of customers who do not use their credit cards and tightening credit approvals to ensure new accounts flow to users with higher credit scores.
"We are closely monitoring payment willingness," Mason said, "We have been monitoring and managing this closely."
When signs of consumers struggling to make timely payments begin to emerge, banking giants like Citigroup often take a common response strategy. By proactively reducing credit limits or closing unused accounts, banks seek to avoid becoming a "cash machine" for customers in trouble.
As one of the largest credit card issuers in the United States, Citigroup's actions may serve as a precursor to future actions by other major banks.
Citigroup set aside a total of $2.5 billion for credit losses in the second quarter, up from $1.8 billion in the same period last year. This includes $1.93 billion in net credit losses related to its U.S. consumer banking business.
Mason noted that the bank has begun to see a growing disparity in spending between high credit score customers and low credit score customers, with some lower-quality customers rapidly reducing their spending
