I. We are changing how we calculate your variable APR for purchases:
We are increasing your variable APR for purchases. Your purchase APR will equal the LIBOR Rate plus 16.99%, with a minimum of APR of 19.99%.
As of September 17, 2008, this purchase APR is 19.99%. The APR equals a daily periodic rate of 0.0548%
II. We are changing how we calculate your variable APR for cash advances:
We are increasing your variable APR for cash advances. Your cash advance APR will equal the LIBOR Rate plus 19.99%, with a minimum of APR of 21.99%.
As of September 17, 2008, this cash advance APR is 22.73%. The APR equals a daily periodic rate of 0.0623%.
I'll do another post explaining what LIBOR is and why it matters a lot to your credit cards and other loans later. But the bottom line is that Citibank is jacking up the rates on its credit cards. In this reader's case, way up:
My purchase apr is going to skyrocket from 8.99% to 19.99%Still, she wants to know if she can get out of the deal. The answer is yes. According to the notice, Citibank is giving cardholders the chance to "opt out" of the rate hike by calling or writing the company by Jan. 31, 2009. If you don't do it before then, prepare for sticker shock on your bills.
Luckily I only use this card for balance transfers and the rate I got when I did the balance transfers were 1.99% until the balance is paid off.
Here's the fine print about opting out: if you do so, you'll be able to use your card and pay the same interest rate you have now but only until your card's expiration date. After that, Citibank's giving you the boot. They'll close your account as of your expiration date, so if that's your only card, you'll need to start looking for a new one.
Once the card is closed, you'll still get billed for any remaining balance, which will accrue interest at the same rate you had while the card was open until you pay it off.
One complication could be how this affects your credit score. By closing a credit card account, it's possible to damage yours score. I'm not sure how that will work in this case. Technically, Citibank is severing the relationship but the argument could (and likely will) be made that by opting out, you're in-effect choosing to close the account yourself.
One solution might be to do nothing. If you're not carrying a balance on an open Citibank-issued card, the rate hike won't matter as long as you don't charge anything that takes longer than one billing cycle to pay off. That way you don't have to worry about a credit score hit for closing the account. In the meantime, shop around for a new card with a lower rate that you can put your purchases on.
Hope that helps.