Interchange fees suspended for donations to Haitian relief…
Recent business and financial news has warned of credit card issuers jacking up rates in advance of federal rules that will put limits on the practice. Just when many people are struggling to figure out how to make ends meet in the midst of a recession, they’ve been slapped with higher interest rates. The logical assumption is that consumers need to minimize their credit card usage to stay out of the cross hairs of lenders. But at least one company, Citibank, the second largest credit card issuer in the country, is using a totally unexpected tactic – lowering interest rates for customers who use their card a lot.
While many Citi cardholders will see a rise in interest rates, select customers will be offered a lower rate for meeting a minimum monthly spending threshold. Customers who spend the required minimum and make their payment on time will receive a rebate on their total finance charges for that month. The rebate could cover a portion or even the entire interest rate hike. Cardholders will also have the option to opt out of the new terms and continue with the old until the card expires; other accounts may be deactivated.
Citi didn’t provide specific details but said that the monthly spending requirements and interest rate hikes will vary depending on the cardholder’s credit history. Nearly fifty percent of its customers will be able to erase at least half of their rate increases through the rebates. The rebates will be based on interest charges for an entire balance, not just monthly charges.
Citi noted that customers who do more business with them will have the best opportunity to reduce their rates. They will benefit from the interchange fees that will be charged with the additional transactions needed to meet the minimum. Only the most conscientious consumer who pays off their balances each month will benefit.
* Be sure to see our complete list of the Citi Credit Cards >