Credit card rates increasing

[sofocused978]

So I recieved a letter from Citi saying that my APR for purchases is about to increase from 5.9% to 14.9%. Currently I have a balance of $19000, $14000 of which is locked in at a 5.9% balance transfer rate until paid off. The other $5000 is @ 5.9% but about to increase. I just spoke with a customer service rep at citi regarding the letter I recieved and they said that my options are as follows. First of all the $14K at 5.9% will not increase. The $5000 will increase to 14.9% or I can opt out of the increase and my rate will stay the same until my card expires in October 2011. At which time they will CLOSE my account regardless if I have a balance or not. If I still have a balance in 2011 the balance APR will stay at the 5.9% until paid off.

So my question is the following. Do I opt out of the increase and let them close my account in 2011, or do I let them increase my rate and hope to have them lower it with a phone call. I have had this card for almost 10 years and I know that people say to keep your oldest credit lines open. Please give me some advice. I have 2 days to figure out what I am going to do.

[boosami]

Originally Posted by sofocused978

So my question is the following. Do I opt out of the increase and let them close my account in 2011, or do I let them increase my rate and hope to have them lower it with a phone call. I have had this card for almost 10 years and I know that people say to keep your oldest credit lines open. Please give me some advice. I have 2 days to figure out what I am going to do.

Is it worth it to you to pay a little over double the interest on that $5,000 to keep the card open? If you choose to opt out, it will not drop off your credit report or potentially hurt you until 2021 (closed accounts stay on and count toward your average account age for 10 years after closing). I'd opt-out because in my opinion it's not worth paying extra interest just to keep an account open. On the other hand, it could be worse--I saw a Citi letter this weekend raising a 7.9% fixed to minimum of 24.99%. Ouch.

The letter stipulates that you have until January to opt out, so I don't know where you're getting the 2-day decision deadline. You may have more time than you think.

[sofocused978]

the letter states the rates will begin to apply to balances on December 3rd.

[Ima saver]

Can you transfer the $5000 over to a lower interest card?

[sofocused978]

tell me how to transfer the highest apr balance from my card to another. I'm pretty sure I can't choose the part of my balance on my card I want transfered.

[arthurb999]

You're going to have to transfer the whole thing... and NEVER use a CC for purchases that has a locked balance transfer rate.

[maat55]

Personally, I would not be so concerned about the age of the card more than getting it paid off. I would imagine that lowering the balance through debt reduction will help your score as well. In other words, I would transfer it all to 0% cards if I could.

I would pay the debt off as quickly as possible, no matter what company holds the debt, then never carry a balance again. I would rather have a little lower score than pay interest.

[Alex_Adviser]

Well its a nice advice to transfer your excess debt of $5000 to a lower interest card, if you can avail a 0% card then it would be even more beneficial, in that case you can transfer even a higher balance to that card.

Regards

[mrpaseo]

As I understand it when a situation arises where you have two percentages on the same card (Such as your case) when you make a payment it will ALWAYS be applied to the less interest rate. So, if you make a 5,000 payment today, you would still have the 5000 on the higher interest rate and you would owe $9,000 on the locked 5.9% rate. This is a ploy that they use to trick you into a lower interest rate then over time, as you charge and keep paying the balance transfers over to the higher interest rate.

If it were me, I would opt out of the increase. Most likely as soon as they closed it, they would issue you another one. Or, apply for another one now from the same company, at one time I had two credit cards from the same company. I would look for a 0% credit card first.

I have to say though; a credit card should be used as a way to spend money you currently have, not a way to spend tomorrow income. I agree with the pay off the card ASAP advice that was given.

Good luck,
Raymond

[kork13]

Just found an article about this exact issue....
Credit card holders livid about 'rate-jacking' - CNN.com

As I mentioned elsewhere, I'm getting the rate on my primary CC moved up from 7.9% to 9.9%, which will take effect in Feb. I'm personally just fine with that, because I don't ever carry a balance, so the rate doesn't mean much to me. However for the millions that do carry large balances on CC's, this kind of thing is going to be pretty hard-hitting. I see the best way to mitigate this problem is to "grandfather" people's current balances at their current rates, but say that all charges after a given date will be assigned the higher interest rate.

[sofocused978]

Interesting, so I just made my final call after numerous calls to citi in regards to their change in terms. This csr I spoke with was very nice and basically told me if I opt out of the rate increase that in 2 years time when my card is about to expire I will receive a letter from citi with the option to keep my account open without them closing it as stated in the letter I received. I asked repeatedly if she was pulling my chain, as I have been a customer of Citi for over almost 10 years and would like to keep my account open for a long time to come. She repeated several times that even if I opt out of the increase I will be given an option prior to expiration to keep my account open. She even tried to offer me another rate but it was still horrible like the one in the change of terms.

I decided to take her name, operator #, mark down the date and time of the call and opt out of the change in terms. In October of 2011 if they reneg there will be hell to pay. Just thought I would share.

[wincrasher]

I like that quote - credit cards are a way to spend money you already have - that's a terrific way to put it.

I'd opt out too. They'd be crazy to close an account in good standing down the road, especially since you've been a good customer for so long - they don't make money if they close good accounts. I'd take the advice of that CSR.

[vonowen]

how pathetic..!!! I guess I'll just have to drop my credit cards then

[ksluis62]

Originally Posted by sofocused978

...if I opt out of the rate increase that in 2 years time when my card is about to expire I will receive a letter from citi with the option to keep my account open without them closing it as stated in the letter I received.

This sounds like the right business move on their part. And consistent with what you'd expect from a CC company: scare as many consumers as possible into accepting higher rates, then mitigate losses on the smart ones. I bet you'll even get a low interest balance transfer rate when that letter comes.

[sofocused978]

the csr basically summed it up and in regards to closing the account that the company would be crazy to close all the customer account who chose to opt out or they would have no more customers.

[Seeker]

Originally Posted by sofocused978

the csr basically summed it up and in regards to closing the account that the company would be crazy to close all the customer account who chose to opt out or they would have no more customers.

Just think of it this way.... two types of customers:
1) Those that PIF each and every month and earn them nothing... in most cases they pay us "rewards" to do this
2) Those that carry forward some balance and earn them some money. What happens when these people have paid all their debt?

I'm not sure of the future of credit card companies as a whole. Except for corporations, businesses, etc.

What's going to happen when people finally do pay off all their debt? Many will be adverse to getting into debt again. And where will the CC companies be then?

[lebaggblu]

Well they'll be getting bailout money from the government of course.