The Deal.
According to the AP, some Citibank credit card customers can now get a rebate of up to the total finance charge on the balance.
The details are still a bit loose, but here are the minimum requirements according to the article:
- Meet the spending minimum (may be as much as $750 a month).
- Make payments on time.
- Have a “good” credit history.
According to Citibank, nearly 50% of its customers will be able to eliminate more than half of the effect of the recent rate increases through these rebates. This is all a part of the credit card industry’s mad dash to ensure their income from fees and rates doesn’t suffer when the “Credit Cardholders’ Bill of Rights Act of 2009″ comes into full effect in February 2010.
Why it stinks.
On the surface, this probably seems like a good deal to most people. After all, they get to slash some of those rotten interest payments.
But the whole point of this “rebate” is to offset some of the interest charges, and the only way you have interest charges is if you carry a balance on your credit card from month to month. So, in order to benefit from this rebate, you need to not only carry a balance but keep spending!
If you can’t pay off your credit card balance, the last thing you should be doing is continuing to charge new purchases on the card!
This type of “benefit” only serves to keep the card holder in debt, and increase the profits of the credit card company.
You may be wondering how they can profit from this plan when they’re reducing the interest charges. The answer is interchange fees.
Citi’s move, meanwhile, is likely intended to generate greater interchange fees, which banks reap from merchants when customers use credit or debit cards, said Ben Woolsey, director of consumer research for CreditCards.com. If customers spend more to qualify for lower rates, Citi will benefit from the additional transactions.
Bottom Line: This is the same kind of “perk” that the Best credit card for automatic savings uses – it’s a perk you can do without. You’re much better off simply paying off the balance once and for all, then you’ll never have to worry about finance charges again.
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