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Citigroup Gets Creative to Boost Cards

NEW YORK ( TheStreet) -- Citigroup (C - Get Report) is offering rebates on interest rate charges to customers who meet certain minimums on their frequency of card use.

The move, which comes even as the company has recently raised rates on many accounts, is symbolic of the complexity of the ongoing challenges facing card issuers.

It's no secret that Citigroup and other banks have been raising interest rates on their card products, cutting borrower's credit lines and implementing other fee changes. The forces at work are twofold: They are trying to make up for large losses on delinquent accounts, but are also looking to position themselves ahead of the implementation of new credit card laws expected to become effective early next year that will provide greater protections for consumers. Citigroup in some cases has raised interest fees as much as 29.99%, according to media reports.

But it's still ironic that the card issuers -- namely large banks like Citigroup, JPMorgan Chase (JPM - Get Report), Bank of America (BAC - Get Report), Capital One (COF) and others -- are taking these steps and trying to entice their customers to use the cards more even as they feel the pain of charge-offs brought on by record unemployment figures.

In conjunction raising its rates, Citigroup is planning to offer rebates on monthly interest rate charges to existing borrowers who spend a monthly minimum amount on Citi-branded cards. The rebates and spending minimums will depend on the cardholders' credit history and will be based on interest charges for a card's entire balance not just new charges.

Citigroup says the rebates are an example of how they are offering customers "greater choice and more control" over their accounts.

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