After a relatively calm three months in which credit card rate increases slowed substantially, Citibank’s decision to raise interest rates to 29.99% on tens of thousands of customers has taken many-myself included-by surprise. Yesterday, I posted some options for people dealing with this situation and I wanted to update those as well as point out some additional points. (See Citibank Interest Rate Increase Solutions for yesterdays article as well as Citibank Raises Interest Rates A Lot to read comments from other visitors.)
First off, most people will need to opt out of the rate increase. Anyone that has a balance and cannot repay it before the rate jumps to 29.99% shouldn’t think twice about that. However, closing a credit card account, especially if it is your only account, your oldest account, or your account with a very high limit will likely see their credit score hurt substantially.
To limit the damage to your credit score, apply for and open a new credit card account. This will provide you with available credit at a reasonable rate and also provide the opportunity to transfer your balance from Citibank. More importantly, however, the damage an account closure can have on credit scores may make it very difficult to get a new card in the immediate future.
Information on current credit card offers can be found in the main section of this website by using the left navigation or by clicking here to view current 0% balance transfer offers.
Another important issue to take care of before you opt out of a Citi rate increase is accumulated rewards points. Generally, when you close an account, you forfeit any credit card rewards your have earned. Thus, be sure to REDEEM YOUR CREDIT CARD REWARDS before you opt out.
Additionally, we strongly request that you request CONFIRMATION that you have opted out in writing. Earlier in the year, while other banks were raising interest rates, I heard from a handful of consumers who called to opt out but never had their account closed.
Lastly, CUT UP YOUR CREDIT CARD and be sure to STOP ALL AUTOMATIC PAYMENTS. This can lead to two problems. First, using your card may void the opt out if they do not immediately close it. Secondly, you don’t want to be late on other bills tied to your card.
I hope this information is useful to you and appreciate any other tips you would like to share with our visitors. If you elect to open a new credit card and have any questions, please feel free to use the contact form for assistance. For more information and to apply for a new credit card, please visit the main section of Smart Balance Transfers by using the left navigation. On our site, you can compare offers and apply online for approval.
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October 22nd, 2009 at 12:01 pm
This info is not what I was told when I called to opt out of the Citi increase. I spoke with a “manager”, who said by opting out, I could continue to use the card for purchases at the current, lower rate until the expiration date on my card, which is about 2 1/2 years from now. In your post, you seem to be conflating opting out with closing the account. It is my understanding from the terms on the letter and on the phone that the account will remain open and active until card expiration.
October 23rd, 2009 at 12:39 pm
I have received conflicting information on the matter and have heard that more than one letter is circulating. Given the possibility that these opt outs may occur at varying times, I felt the safest thing for me to do was provide the most cautious information. I will look into the matter to provide more clarification, but my first concern is to protect consumers, and Citi’s letter’s did not provide enough clarity to its customers.
October 24th, 2009 at 8:48 pm
My wife received such notices on both of her [bathroom expletive deleted]bank credit cards and they we called and cancelled them immidiately. I also cancel my AAdavantage American Express Cards. I am ready to go to cash. I do not need this 30% burden on me.
October 26th, 2009 at 10:24 am
Ex Citi user,
Many readers have written in feeling the same. However, there are a lot of things that require having a credit card and a lot more that make having a credit card useful, such as paying for hotel rooms. So while ditching plastic altogether may feel good, the hassles it creates and the issues it can cause to credit scores make these monsters a necessary evil. Just get a good credit card for balance transfers so your money doesn’t flow into the pockets of a company that has wronged you.
October 28th, 2009 at 12:18 pm
I just recieved the letter that as of Nov 29th my expedia citicard will change from 9.24 to 29.99. That was my favorite credit card because of the low interest and rewards, which I used for all my big purchases. All of my other credit cards have lower limits and higher interest rates. I am opting out and paying off my balance under the 9.24% rate. I feel tricked and citibank has lost another loyal customer.
October 28th, 2009 at 4:03 pm
The only good thing I can say about this situation is that Citi’s massive doubling and tripling of rates is leading people to opt out and pay off their balances. With smaller increases, customers are more likely to accept the new terms. But at 29.99%, everyone is opting out or taking advantage of 0% balance transfer credit cards. In the long term, the people who were hit by this rate extortion may end up in a better financial position because of it.
November 21st, 2009 at 4:56 pm
This is the type of legal extortion that people need to do something about. I am not satisfied with letting them win and by opting out and paying them off that’s all we are doing. We should all join together and sue CitiBank for the taxpayer money they took during bailouts to keep their CEO’s making 7 figured bonuses. Enough is enough.