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.
In case you haven’t had a chance to read this letter, here’s what Ken Stork (ironic name is real) delivered to mailboxes across America.
View Page 1 of the Rate Increase Notice (PDF, opens in new window)
View Page 2 of the Rate Increase Notice (PDF, opens in new window)
Related Posts
- New Credit Card Rules and Interest Rate Reductions
On August 22nd, the second phase of the CARD Act was enacted. Unlike the first set of new credit card rules that took effect in February, the newest credit card rules won’t have a huge impact on the wallets of most people. One rule limiting penalty fees will help those who accidentally (or habitually) make [...]...
- Small Business Credit Card Rate Increases
While consumers don’t have to worry about credit card rate increases, small businesses still need to closely monitor their credit card statements. Why? Because small business credit cards aren’t covered by the CARD Act, credit card companies can increase interest rates at any time, for any reason. I recently found a rate increase notice on [...]...
- Citibank Raises Credit Card Cash Advance Fees
Citibank recently raised the fee it charges credit card users for cash advance transactions to 5% with a minimum fee of $10. This move is not surprising, as banks have been raising cash advance and balance transfer fees since the start of the Great Recession. The 1 percentage point increase by Citibank puts its cash advance [...]...
- Cash Back Credit Card Promotions
After treating customers horribly for the past two years, credit card companies are desperately trying to lure in new customers. One tried and true approach is to offer free money in the form of cash back credit card offers. The other method is offering excellent 0% APR balance transfer deals that can last up to [...]...
October 20th, 2009 at 4:55 pm
I received the same rate increase letter, dated Oct. 12, 2009. It states “We are making changes to your account terms”, meaning, they are raising the rate to 29.99%. On the back of the letter there is a Notice of Change in Terms and states that the changes will be effective Nov. 30, 2009. However, the bullet points directly below indicate that the variable APR for purchases is being increased. “As of September 15, 2009, this purchase APR is 29.99%.”
Very confusing. Although I’m sure it’s a mistake on the part of Citibank, it makes it sound like the increase took effect before customers were notified. Did anyone else notice this?
October 20th, 2009 at 7:11 pm
Pam,
I had an attorney look at the letter and he believes that it was intentionally written in a way that would confuse recipients. In a nutshell, he believes Citibank is reserving the right to raise interest rates in the next one to two years, not right now, but even he suggested contacting Citibank to request a clarification. Its ironic, but they’ve found a way to make simple language more complicated than dense paragraphs of legal jargon. Like all financial regulation, the new credit card laws, which call for plain language, were only written so they could be strectched and abused.
In my opinion, Citibank is hoping that 20-30% of the people who get these notices ignore them – i.e. treat them as junkmail – which thereby gives them a sneaky way to charge whatever APR they want at card expiration. Perhaps another chunk of people will blindly accept the terms because they have no other options.
As much as I don’t like to learn about these situations, I am happy that people like you are taking action. I’m just worried about the people who won’t find out about this until their interest rate hike takes effect and they can no longer afford their monthly payments. That is the real tragedy.
October 20th, 2009 at 9:32 pm
The first page of my letter reads, “As always, you have the right to opt out, close your account and pay down your balance under your current terms. If you opt out, you will not longer be able to use your Citi card.”
October 23rd, 2009 at 12:05 pm
For what it is worth, apparently you can receive this letter and balance transfer options at the same time. However, you will be fortunate enough to receive the balance transfer option both in paper AND email.
November 7th, 2009 at 10:57 pm
The best thing to do is pay your balances off every month.
Credit card companies are greedy, moneygrabbing [EXPLETIVE DELETED]. You need to beat them at their own game.
Get a CASH rewards card that has no annual fee. Go for CASH rewards. Forget the miles and prizes bullcrap. Then charge everything to the credit card, pay the whole balance off and earn the cash rewards without owning these whores any interest.
Of course, this requires a lot of discipline, and the majority of you don’t have that kind of discipline. The credit card companies don’t put a gun to your head. They are trying to screw you, but, with some planning, you can screw these [EXPLETIVE DELETED] for free.
Don’t fall into the trap of these [EXPLETIVE DELETED] credit card companies and then whine about how you have been had.
I have 4 credit cards. All of them are CASH reward cards with no annual fees. I use them for everything and pay everything off each month. I pay my rent, my phone bill, my car insurance, my cell phone..you name it, I pay everything with the credit cards.
This gives me the ability to ride on these [EXPLETIVE DELETED] credit card companies’ money free of charge for a whole month. Yes, it feels good to ride these [EXPLETIVE DELETED] for free . Ever ridden a [EXPLETIVE DELETED] for free??
My money in my bank earns interest for a whole month, and then, after a month I pay the [EXPLETIVE DELETED] credit card companies.
And, every two or three months, I get cash back rewards from these [EXPLETIVE DELETED].
It is like screwing these [EXPLETIVE DELETED] for free and getting money from the too.
It is beautiful.
November 8th, 2009 at 7:57 am
I received the letter, only 21.99%. However, I can EARN A SPECIAL RATE that is below my current rate if I transfer $5000, or more, by December 10. The rate would be 15.99%. I would call this coercion if they hadn’t given me other options, e.g. opt out, or pay down my balance at my current rate. This is the highest rate of any of my cards!
November 9th, 2009 at 12:07 pm
Wow, how nice of them to offer you an above market rate if you bring more debt to them. Perhaps they’ve forgotten that their competitors offer 0% balance transfers and lower long term rates. I hope others who get this email are smart enough to avoid this scam.
November 12th, 2009 at 12:40 pm
Just got my letter. After talking to Citibank we are opting out and we should be able to pay the existing balances at our current rates. What they did say is that any balances that are not at a special rate will go up to 23.99% rate. OMG. I don’t use the card for purchases just used the card to consolidate debt. My guess is we are going to get a great deal on something to continue with our card at the experiation date. We have a great credit score and a high available credit. I can’t think they want us to leave do they?
November 13th, 2009 at 10:02 am
Mike,
You, like many of the people who have written in, fall into the good/great customer category. Where it any other bank, I would think they absolutely wouldn’t want you to leave. But it is Citibank, and its hard to figure out what exactly they are trying to do.
November 14th, 2009 at 4:53 pm
I’m confused about this situation. I have a balance on my citicard and wasn’t sure if this new apr would only apply to new purchases or to my balance as well. I called to ask and I was told the 29.99% would only apply to new purchases. However, this does not make sense to me at all and seems untrue. Does anyone else know whether this new apr rate will be applied to balances?
November 16th, 2009 at 9:45 am
Jessica,
Others have posted conflicting responses on this matter. Generally, its best to be cautious, so unless you can get a confirmation in writing, you may want to consider opting our to be safe.
November 17th, 2009 at 11:05 pm
Sure, and if good customers *don’t* ignore it, opt out and transfer balances to a new card, they still win – all those debts get paid. Fast.
Now, my card does not expire for a year and a half. I wonder, if I opt out, and after the card is closed, do they still charge periodic rates for the remaining debt until it’s paid off (which would be bull [expletive])?
And, if I opt out, and get them to close the account immediately, thereby halting all activity, same thing… compounding interest still accrues?
November 18th, 2009 at 10:18 am
Kaytey,
Thank’s for self editing your Expletive.
Unfortunately, you would surely be charged interest until your account is paid in full. Citi’s trying to drain any cent they can from customers.
November 19th, 2009 at 5:46 pm
Welcome to the “we fixed it” tsunami thanks to our government. I just received notice that after 15 years with Citibank and never missing a payment, I am rewarded with a notice that my rate is being jacked-up to 19.99%.
Now, when I first started my credit that rate was only given to those considered to be a great risk. So I called.
Big Mistake.
Frankly, they could care less. The “customer diservice rep” told me so.
Congress is enacting some legislation to “protect” us. But in the meantime, they gave them plenty of time to put the screws to their customers before it went into effect. So behold our rates go through the roof. Thanks for the help boys.
Maybe someone in Congress should put a stop to this considering the current economic situation. (wishful thinking)
Im so mad I have no words!!!!!!!!!!
January 20th, 2010 at 12:29 am
“You don’t carry a balance on the card so the rate shouldn’t matter”, thats what the Citi representative tried to peddle. Thats not the point. Citi has decided to try to screw me (and many others). Well Citi I do have a choice, I have other credit cards with banks that have not tried to screw me.
Citi makes approximately $1000 a year from the fees charged to retailers from my purchases. I now choose to let a different bank earn those fees. I encourage others who are able to do the same. If enough people quite sending these fees to Citi, maybe they will get the message. Maybe just maybe Ken Stork won’t get a bonus for such a sleazy act but instead a reprimand for driving business away from Citi.
January 20th, 2010 at 10:51 am
Ken,
You are right. You happen to be fortunate enough to not pay interest. But what about the people who have balances and are paying 29.99% interest? Not carrying a balance isn’t an option, and unless they can get a balance transfer credit card, they are gonna be pushed to the brink of insolvency. Fortunately, good customers like you who have a choice are using it.
February 16th, 2010 at 6:27 pm
Citi is by far the most pathetic waste of a company that is still doing business. After 13 years of being a good customer for them and having a zero balance each month, I have been issued an annual fee of $60.00. The letter they send is a sorry excuse for them trying to generate revenue…how sad. They basically make you spend x amount of money per year and they will credit your account at the end of the year. Customer service is explaining it as a business decision…yeah..staying on their boat before it sinks!
March 26th, 2010 at 2:47 pm
Just got my new statement from Citi. To my amazement my interest rate hiked to 29% I called Citi and they told me I didn’t opt out, so the rate was increased. I told them I had not made any NEW purchases to my account since that letter was mailed. I was told it applies to all or any purchases made on the account. I told them that’s not what that letter stated. It says purchases after Sept. 15, 2009. I still have not made any purchases since then. They told me they would send my acct for review and see if they could lower my rate and that would take 5-7 days. Do I have any other recourse? I told Citi that was a sneaky was of doing business!
March 26th, 2010 at 3:58 pm
Kathy,
This is one of the first times someone has reported the Citi is looking into the matter. Most people get told that nothing can be done. I wouldn’t wait around too long. It may just be a stall tactic. I would call back to make sure that your account is actually being reviewed. There should be notes on your account. If the person or the supervisor doesn’t see anything, then you might have to start this all over again.
Plus, they’re getting 29.99% while you wait. Do make sure you are refunded any interest they charged you at that rate before you noticed the change. And if you’re rate wasn’t that good to being with, you should just transfer your balances to a 0% credit card from a good company and wash your hands of the matter.