Are you a Citibank credit card holder who defaults on outstanding payments often? Well, here's news for you. Citibank has issued a notice to its credit cardholders announcing an interest rate hike on revolving credit starting January 2020.
"The new interest rate will be applicable on opening balance and further transactions including cash withdrawals," said a statement from the bank. Currently, Citibank credit card customers who default on payments are being charged in four different interest rate slabs - 37.2 per cent, 39 per cent, 40.8 per cent and 42 per cent. These rates have now been increased to 42 per cent, 42 per cent, 42 per cent and 43.2 per cent respectively from January 2020.
|Current interest rate||Revised interest rate|
|37.2 per cent||42.0 per cent|
|39.0 per cent||42.0 per cent|
|40.8 per cent||42.0 per cent|
|42.0 per cent||43.2 per cent|
Credit cards which are currently on promotional schemes will also be migrated to 42 per cent/43.2 per cent interest rates in case of defaults.
Here's an example for your better understanding:
Assume that a cardholder has only made a partial payment of the outstanding amount for February, and the statement is generated on 17th March for Rs 5000 (including interest from the date of transaction).
Say the card member makes a payment of Rs 2000 on 25th March and a purchase for Rs 1000 on 30th March. No further payment is made on the card until 17th April (the next statement date).
Assuming an interest rate of 42 per cent per annum (3.5% per month) on the card, interest will be levied as follows:
It is mandatory for any credit card user to repay at least 5 per cent of the outstanding amount before the due date failing which a penalty will be imposed. Interest will be applied on the due amount which will be calculated on a monthly basis.
“Only if customers choose to pay less than the full amount of the monthly bill or do cash withdrawal transactions, the interest rate for using the revolving facility applies,” the statement read.
It is important to note that, unless you clear the full outstanding amount, you can't enjoy the interest-free period.
In other words, if you haven't paid your previous month's bill yet and if you have further spent from your credit card in the ongoing month, the new bill will not be interest-free.
However, if you pay the full amount before the due date, then you can continue to enjoy the interest-free period.
With the hike in interest rate, Citibank credit cardholders will have to be more careful as payment defaults could burn a hole in your pockets now. Hence, make sure you pay the full amount before the due date to save on the interest.