Advice: To opt out or not?

Anonymous · ‎07-18-2009

Hello,

So I just got a notice from Citi that says they are changing their policy. If I don't opt out of the change my standard APR will go from 18.99 to 29.99%!!!!

I have $7500 on the standard APR, and $7300 on a permanent 3.99%. So my effective rate currently is 11.58%, while this insane increase would make it 17.15%.

Now, since the $7300 on the 3.99% will be paid down first, I estimate that I won't get to the standard APR balance for about a year. This means that this APR increase would cost me at least $800.

I have a total of $60k debt on all CCs. My total effective APR = 11.63% combining over all my credit cards. With this increase, my total effective APR on the $60k would become 12.88%. So for the overal big picture, it's not a HUGE total effective APR increase, but it's still $800 down the drain.

I finally got out of school, and currently make $75k/year so I am paying down my CC's very aggresively (at least $2000 per month, $3000 when I can). I wanted to buy a car next summer, so I'm a little worried about how much closing this account (opting out) would effect my FICO score. (Currently at 668 EQ/673 EX/656 TU)

If I do opt out, I think my total debt owed on revolving credit lines will become more than the actual available credit I have. How much would that hurt my score?

Should I opt out or not?

Thanks!

UPDATE:

Actually one thing in my original post is wrong. It would probably not take me 1 year to get to the 7500 on the standard APR. I didn't take into account the fact that this would become my high priority card (since it would have the highest effective APR), and I would pay it off more aggresively than I do now.

Message Edited by bogfrog on 07-18-2009 04:55 PM

dee · ‎07-18-2009

I just signed onto this forum again as today I got my letter from Citi stating exactly what yours did as per your message on this board. I have until Aug. to figure out if I want to keep my card with an outrageous percentage rate, or keep low rate and cancel card at same time. Unreal!! I have never been late and we have a great credit score. This is a card we use a lot and it does have the highest balance, but when it's almost 30%, there is no way I will want to have them steal more money from us.

What did you do? My husband thinks we should just cancel the card, even though it will hurt our credit, but at the same time, if we do cancel the card, what will keep them from raising the rate again in two months???

Would love to hear what you did. Thanks.

Anonymous · ‎07-18-2009

I didn't do anything yet, that's why I just posted this message. Still waiting to hear some input from the people here.

I have also never missed a payment in 10 years of having the card. 29.99% is simply outrageous.

If I do decide to opt out, I will first ask them if they can "cut me a deal" and argue with them a bit. Whatever you do, don't just blindly accept it as an opt-out vs. 29.99% cut and dry choice. Definitely argue with them first and try to get a better deal!

dee · ‎07-18-2009

Oh sorry, I thought you posted it awhile ago. Did not check date...yes, when I called today and spoke to someone, she said all cc companies are doing this now, not just them. It's funny, as we just received an offer from Chase today to pay off other cards for a fixed 4.99. I have not read the terms, but it's unreal how these companies suck you in and spit you out. I asked for a lower rate, but no go. Usually I can negotiate, but not any longer. I will think about it and stew some, and then decide what to do. That rate is simply stealing from good payers and it's all of the people who have lost their jobs, etc., that have hurt the companies. I don't blame them though. I still blame the banks. Ok, well I'll see what other people think too. Take care...good luck!

GomerPyle · ‎07-18-2009

For your information the Credit Card Accountability, Responsibility and Disclosure Act in February 2010 forces CCC to apply payments in excess of the minimum owed to the balance with the highest interest rate, and then to other balances in descending order. I believe this change will affect your calculations.

This government mandate is the reason you are being ratejacked.

dee · ‎07-18-2009

Explain that to me?

Anonymous · ‎07-18-2009

Just a thought, CITI normally allows you to apply for a different credit card and transfer the balances to the new card. Try and speak with a CSR about transferring balances to a new CITI card with a lower APR.

Talk about hypocrisy. The government on the one hand chastises banks for unscrupulous practices, then CITI, which is majority owned by the government, engages in the same practices. Go figure! lol

@Anonymous wrote:
Hello,

So I just got a notice from Citi that says they are changing their policy. If I don't opt out of the change my standard APR will go from 18.99 to 29.99%!!!!

I have $7500 on the standard APR, and $7300 on a permanent 3.99%. So my effective rate currently is 11.58%, while this insane increase would make it 17.15%.

Now, since the $7300 on the 3.99% will be paid down first, I estimate that I won't get to the standard APR balance for about a year. This means that this APR increase would cost me at least $800.

I have a total of $60k debt on all CCs. My total effective APR = 11.63% combining over all my credit cards. With this increase, my total effective APR on the $60k would become 12.88%. So for the overal big picture, it's not a HUGE total effective APR increase, but it's still $800 down the drain.

I finally got out of school, and currently make $75k/year so I am paying down my CC's very aggresively (at least $2000 per month, $3000 when I can). I wanted to buy a car next summer, so I'm a little worried about how much closing this account (opting out) would effect my FICO score. (Currently at 668 EQ/673 EX/656 TU)

If I do opt out, I think my total debt owed on revolving credit lines will become more than the actual available credit I have. How much would that hurt my score?

Should I opt out or not?

Thanks!

UPDATE:

Actually one thing in my original post is wrong. It would probably not take me 1 year to get to the 7500 on the standard APR. I didn't take into account the fact that this would become my high priority card (since it would have the highest effective APR), and I would pay it off more aggresively than I do now.
Message Edited by bogfrog on 07-18-2009 04:55 PM

Message Edited by illtakecreditforthat on 07-18-2009 05:31 PM

Message Edited by illtakecreditforthat on 07-18-2009 05:32 PM

dee · ‎07-18-2009

Sounds good, but I believe you are just applying for more credit and eventually that rate will hit 30% too. I know Citi is one bank that got millions from the Gov't. Excuse me, from US !!!!

Anonymous · ‎07-18-2009

@dee wrote:
Sounds good, but I believe you are just applying for more credit and eventually that rate will hit 30% too. I know Citi is one bank that got millions from the Gov't. Excuse me, from US !!!!

As explained by a CITI CSR, you are not getting more credit, just transferring to a different card (hopefully with a lower rate). Question to OP: Which CITI card do you currently have?

dee · ‎07-18-2009

It's strange, but we have a Citi Master Card, which is the one going up in rate and we have a citi Simplicity ?master card too. Not sure what the difference is, but I will call them to ask many more questions before doing anything. I think no matter what card, no matter what your credit score is, the CC companies will get all of us. We should all cancel CC cards!!!! They will hurt them, but of course that will NEVER happen!!