I just got a copy of the Citibank interest rate increase letter and, perhaps like many of you, am completely baffled.  Unfortunately, I’ve spent the past five years reviewing credit card terms and was hoping to find some definitive answers in this letter.  However, the terms Citi is proposing are as incomprehensible as its decision to raise rates on what I’ve learned from over 60 readers are very good customers with very good credit scores.

1.)  Traditional opt out notices require those who opt out to accept an immediate closure to their account.  You opt out, the card is closed, and that is it. Period.  In the letter I reviewed, it states that the cardholder can use the card until the expiration date on the card.  This wreaks of trickery and my fear is that consumers who opt out but use the card after the opt out date will see their rates increased to 29.99%.

Consequently, I recommend that if you get this letter and choose to opt out that you CUT UP YOUR CARD and CANCEL AUTO-PAYMENTS.  While I don’t know exactly why the accounts are to remain open after the opt out, I think the safest thing to do is expect the worse.

2.)  The letter I reviewed offers a 10% monthly interest rebate.  On a 29.99% APR, that serves to reduce your rate to 27%.  This is clearly a ploy to prevent people from opting out, but if you’re reading my blog, I’m going to assume you realize what a joke that is.

3.)  Rewards, rewards, rewards:  The person who sent me a copy of the rate increase letter informed me he had over 80,000 Thank You Rewards points (also known as Thank You for Nothing Rewards or Thank You for the Bailout Rewards).  On page two of the letter, it states that all rewards will be lost when your account is closed.  Now, once again, because opting out and closing seem to be two different things to Citi, it is unclear when Thank You Rewards points will be forfeited.  However, I strongly recommend cashing in all rewards before you opt out just to be careful.

Ultimately, the only positive thing about this situation is the fact that many of you recieved this letter because you are good customers with good credit.  This means you can get a new credit card, do a 0% balance transfer, and are smart enough to opt out immediately.  Unfortunately, I learned that a lot of people ignore letters such as this, and I hope the mainstream media picks up on this story in time to alert others of this deplorable situation.