Similar to the recent fall of Washington Mutual, Wachovia announced today that it's banking operations have been purchased by Citigroup. Wachovia had invested heavliy in "adjustable rate mortgages" which allowed borrowers to obtain loans at attractive introductory rates and defer higher interest payments until later years. Unfortunately, delinquencies have risen sharply in the past 6 to 12 months, causing Wachovia like similar bank casualties, to cover large amounts of debt obligations.
With two large banks being forced to sell, it got me thinking about whether or not cardholder rewards could still be redeemed. Both Wachovia and WaMu have credit card products that offer the ability to earn rewards. While most people are concerned about whether or not they will be able to use their credit card, they should also be thinking about cashing-in on their rewards before they are locked out or receive a notice that reward programs won't be honored by the new bank.
I'm not trying to start a "run on the bank", but given the uncertainty of the market conditions, consumers must fight to hold onto whatever assets they have in the possession with these banks. According to a Wachovia spokesperson, "As we proceed, I'm sure somewhere down the road, Citigroup and Wachovia will look at what various rewards programs are in place. Today, nothing has changed for anyone." In my opinion, this isn't much of a vote of confidence that reward programs wouldn't be considered as part of the new debt that JP Morgan Chase or Citigroup is willing to absorb. Again, from the banks' perspective were talking points and not hard consumer greenbacks.
Wachovia will continue to operate under the Wachovia name, while Citigroup has moved to the top of list as the largest U.S. bank.