Copyright 2006 Edward VeglianteCitibank recently launched a new credit card that takes
away an important sting felt by many consumers: late fees.
In an unusual move, the bank is now offering consumers
?permanent forgiveness? for late payments and will no
longer assess the customary $39 late fee when a payment
arrives after the due date. While the offer sounds great on
surface, if you dig a little deeper you will soon learn
that there are some things about the new Citi Simplicity
card that can cost you more money in the long run. Let?s
take a closer look at what this credit card issuer is
really offering with its new card.
The Problem
Consumer advocates have long cried foul when it has come to
credit card late fees and penalties. Not only would you be
assessed a one time late fee ranging from $29 to $39 if
your payment arrived late, but your interest rate could be
permanently increased to the default rate, typically as
high as 29% annually. This ?double whammy? further made it
difficult for you, the credit card holder, to ever pay down
debt.
Citibank?s Solution
In a bold marketing move, Citibank ? one of the largest
issuers of credit cards in the world ? came up with its
Citi Simplicity card in response to criticism levied by
consumer advocates at the industry and at the bank
personally. The new card, with no annual fee and no late
fees, is designed for card holders who have been bitten by
the late fee bug. No longer will you, as a card holder,
have to worry if the check you sent off just before the
payment due date arrived on time. With the Citi Simplicity
card, a late arriving payment will be credited and no late
fee assessed.
Taking a Closer Look
Within Citibank?s offer are a few things that you should
understand before you make the switch:
1. A late fee will not be charged to your account, but your
interest rate may surge to the default rate. The default
rate, in this case, can be as high as 29%! That?s bad news
for you especially if you had a fixed low rate previously.
2. You could also get a false sense of security by
incorrectly believing that paying late regularly doesn?t
harm you in some other ways. For instance, consistently
forwarded late payments can become part of your credit
report, thereby negatively affecting your ability to
purchase a car or a home down the road at a favorable
interest rate. Important to note, a higher interest rate
can add thousands of dollars to the purchase of a new home.
3. Finally, Citibank will waive the late fee only if you
promise to continue to use the card. This is bad news for
you especially if you are trying to reduce your balance
each month without having to purchase something new, which
simply adds to your balance.
In all, the Citi Simplicity card has much more to it than
what meets the eye. For some people, the new card is a
welcome change especially if you are one who pays off his
balance in full each month. If you aren?t, the Citi
Simplicity card may cost you much more in the long run.
Should you fall into this second category, it would be
better for you to keep your existing card or shop for a new
card with other features and more favorable requirements.
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Ed Vegliante runs the website
http://www.credit-card-surplus.com , a well organized
credit card directory enabling the consumer to compare and
apply for a variety of credit card offers including the
Citi Simplicity Card.
