Citibank is raising credit card rates

Closeup of credit card

When trying to ward off increased regulation in 2007, Citibank executives told Congress they wouldn't raise rates until an account expires.

But now, thanks to all of the bad mortgages on its books, Citi is in serious financial trouble and needs a billion-buck federal bailout to keep from collapsing.

It's also trying to make more money by breaking that promise on interest rates and tacking two to three percentage points onto the rate of any credit card customer who has gone two years or more without an increase.

Borrowers were notified in their November statement or by special letters that say "Important Information Enclosed" on the envelope.

Citibank is being a little nicer about this than most credit card issuers.

Every card gives you the chance to opt out of the rate increase by sending it a letter rejecting the new terms.

Although that allows you to pay off the balance at the existing rate, it usually means you can never use the card again.

Most cards include a nasty little clause that says you accept the higher rate if you charge just one thing after the rate increase takes effect, even if you submitted a letter rejecting the new terms.

Citibank isn't doing that.

If you decline the new, higher rate, you will be able to pay down your account balance under the old terms and you'll still be charged the old rate on new purchases.

But the account will still be closed when the card expires.

What to do?

We think you have two good options.

Submit a letter rejecting the rate increase and pay off your balance at the existing rate.

This credit card calculator can help you devise a repayment plan.

Or, if you have good credit, transfer your balance to a new credit card that charges 0% interest for a year. This may be the best option of all.

Every dollar you pay reduces the balance, making this the surest, quickest route to wiping out your credit card debt once and for all.

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