Citibank - No Maximum Limits!

This is not an April Fool's joke! CitibankWe received a letter from Citibank notifying us of Change in Terms and Conditions for their credit cards. Beginning on April 3rd, Citibank is going to remove the maximum dollar amount on the Transaction Fee for Balance Transfers. Earlier there was a $75 maximum limit on the balance transfer fees. Now the fee will be a flat 3% of the amount of the balance transfer, but not less than $5. In the letter it was written in bold that "This fee is a FINANCE CHARGE."

However Citibank has been gracious enough to offer its customers the option to opt out. You can opt out of this change till your card expires or your current membership ends.

For those of you playing the Balance Transfer Game (0% APR), i.e. you transferred some principal into a high yield savings account to make some money on it; it would be worthwhile to recalculate your options. An example might explain the situation well.
  • Say you had a 0% APR offer for 6 months and you had a credit line of $15000.
  • You decided to do a balance transfer for $10000 to a high yield savings account giving you a 5% APY.
  • Simple Interest Earned in 6 months : (5*10000/100)*6/12 = $250
  • Balance Transfer Fees:
    • Old T&C: $75 maximum
    • New T&C: 3% of 10000 = $300
  • So you will end up losing $300 - $250 = $50 in the whole deal!

Looks like the folks at Citibank have done the math and turned the game of earning interest (from high yield savings a/cs) on 0% APY balance transfer deals on its head! It might be time to get your calculators out at the earliest, calculate your profit in the deal and pay off all the balances on Citibank's credit cards. Or you may choose to wait till the end of your opt out periods. Happy number crunching!

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