Just a quick note before someone falls prey to this. I just received a letter from my Citibank credit card, notifying me that my terms are changing.
In particular, the changes are:
- An increase in the variable APR for purchases
- An increase in variable APR for cash advances
- All APR will be allowed to automatically increase up to 29.99% if I do not make the minimum payment or make a payment to them that isn’t honored.
- A 3% fee for foreign charges will be added
- There will be a transaction fee for balance transfer.
If you have a Citibank card, you will no doubt get it so I won’t go into each point in detail. The section that I want to point everyone’s attention to is the “Right to Opt Out” section.
Apparently, we can call or write to them if we want to old (better) terms. However, here’s the fine print that you need to think about.
If you opt out of these changes, you may use your account under the current terms until the end of your current membership year or the expiration date oon your card, which is later. We will close your account at that time. You must then repay the balance under the current terms.
Sounds to me like if you have a balance and opt out, you could be forced to pay off the balance in a few months! So be careful and read the fine print!
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David,
I don’t have a Citibank credit card but appreciate the heads up. I can sense that you really want to help. Thanks so much for looking out for us.
Richard: Glad to help and these comments are what drives me!! Keep them coming!
If you opt out, they typically close your account — which means you can’t make any NEW charges, but they’re happy to continue charging you interest every month under the old terms until you pay it off in full.
-Erica (did this with Citibank)
Erica: Ahh that sounds better. Hopefully they won’t make you repay everything immediately. I wonder if they will just increase your APR though?
It’s not just Citibank, although I did get that one a few months ago. I got mine from Chase last week, although oddly enough, only on one of the accounts that we have and it didn’t matter anyway because that account had been compromised a few weeks earlier and had been closed down.
As for why they’re raising these rates, besides the fact that they’re drowning after opening up lines of credit to anyone and everyone, I wrote something about cards as well today and would love to hear your thoughts on it, Ning. The “S” Word.
I find that even this does not work sometimes. These credit cards send stuff in the mail about all the changes they are making, and what a mother to do?
Andrea: Despite everyone saying that the credit card bubble is the next to fall and that everyone will default, I just don’t see it because many people are still going to be able to come up with the minimum (unless everyone loses their job). It’s $200 versus $2000 for a mortgage so I don’t believe it’s going to be as severe unless we get depression like unemployment numbers (10%+ etc).
Ning: Separately, I would agree with you. But if skipping the credit card payment means you can get your mortgage payment in, which would you choose to pay?
Andrea: I see your point but the effects will depend on the amount of people that your scenario happens to. I just don’t think that’s a lot since I truly believe that anyone can also stretch out $200 out of their monthly budget if they REALLY try to as long as they have income.
We will see though. I sincerely hope that more bad things don’t happen.
If you “opt out” they Citibank will close your account and you will continue to pay off the card at the present terms. Here are some things to consider. Once the account is closed you may receive additional notices regarding a change to the status of your account. Do not toss them out thinking they no longer apply to you. You must continue to opt out or the terms will kick in as stated in the letter. Yeah, I know, it doesn’t make sense your closed account would be affected but they can still change the rate and other terms. Of course, if this happens, you can call Customer Service to point out the error and they will “research” it and let you know, by mail what they decided. Trust me … it’s easier to keep opting out with each and every notice.
The other thing to consider is that your credit report will now have the comment “Closed by Issuer”. Though true, it tells only part of the story. First your credit score goes down because your level of debt to available credit has now increased (you still have the debt but no longer have the credit). Also, no one seeing your report knows why Citibank closed the account. All someone can see is that Citibank, not you, wanted the account closed.
Solution? Call Customer Service and see whether you can negotiate alternate terms.If you can’t and must either accept or “Opt Out”, well, that’s for you to figure out. Good luck.
Kathryn:
One piece to add to your summary, which was very helpful - usually when you opt out, there is a time limit as to how long you have before your balance has to be paid off. If you’ve been paying minimum balances but are all of a sudden needing to pay off everything in six months, it could significantly impact your budgeting.
After this economy trouble, I have received tons of these letters for a raise in APR. Even with credit scores over 800, these companies don’t give you a break!
-Mike