This past weekend, Citibank customers began receiving letters in the mail regarding interest-rate changes to their credit cards. If customers don't agree to be bound by the new terms, Citibank says that customers will be allowed to opt out. Those who do opt out, the bank wrote, can continue to use their cards until they expire (at which point the cards would be canceled). Still, as easy as that sounds (and Citibank's opt-out process is actually relatively easy), customers can get themselves into trouble if they fail to opt out properly, which is why it's so important to follow opt-out instructions carefully.
Need to write an opt-out letter to Citibank? Use this one (link here)
To be sure, Citibank is just the latest in a string of credit-card companies to announce interest rate hikes (story link here). Last month, American Express said that it would raise rates by two to three percentage points on some of its customers. Nordstrom recently raised interest rates, applying the rate increase to every one of its 2 million customers (story link here).
Chase has also begun to hammer away at some of its customers. Customers have started receiving notices of account-management fees and higher minimum payments. For these customers, there is a $10 monthly fee and minimum payments are now pegged at 5% of the balance. Talk about steep. Chase is giving customers one of two choices: you either opt out, or you accept the new terms. If you do decide to opt out, you must pay the balance off and close the account by January 1, 2009. Luckily, Chase isn't also raising interest rates on these customers. That would be a triple whammy. Here is a copy of the letter that Chase cardholders (who are affected) are receiving (click to enlarge):
Citibank's opt-out procedure is relatively easy. In its letter, the company says that customers can opt out by calling or writing by January 31, 2009. If cardmembers do decide to call (866-565-7030), they should be prepared to give Citibank their account number. If a customer decides to write (Customer Service Center, P.O. Box 6218, Sioux Falls, South Dakota, 57117-6218), the customer should be prepared to give a name, address, and account number. Here's my advice: If you do decide to call, I would follow up with a letter anyhow. The opt-out procedure is a legal process and I treat it as such. As a result, I would absolutely do it in writing as well. After you've opted out, Citibank will allow you to keep the card open until it expires. The card will be canceled after that. Here are two examples of the APR letters that Citibank customers are receiving (click images to enlarge):
Bank of America, meanwhile, is a real stickler when it comes to opting out of its rate changes. Everything must be done in writing. Indeed, a phone call is not sufficient. You must send a letter to the address it specifies. The letter must include your name, full credit card account number, and state that you reject the proposed rate change. The letter must be typed or printed (if you write the letter by hand). Additionally, your letter cannot be sent with a payment or any other kind of customer-service request. In other words, the letter must be sent separately.
Bank of America is also quite specific about deadlines. Letters must often be written immediately. If your letter is not received by the deadline specified in the letter, your rejection of the new terms will not be effective. This means that Bank of America doesn't care about the postdate on your envelope. It wants the actual letter in its hands by the deadline. Don't screw that up.
Finally, you also agree to not use your Bank of America account after a specified date. If you do use the account -- by making new charges on the card or by using convenience checks from the bank -- the new changes will go into effect, regardless of whether you rejected the terms in a timely fashion. In other words, if you reject the rate increase, and subsequently use your account for any reason, your rejection is ineffective and you'll be bound by the new terms. If you have recurring bills that are tied to the card in question, be sure to remove those! A single slip up could cost you.
I can't emphasize this enough. If you receive a change in terms, and you want to opt out of the proposed changes, please be sure to write a letter. The letter, meanwhile, does not have to be lengthy and full of legalese. Just include the basic information that is asked for. If the card company wants your account number, phone number, and address, then write a single paragraph with that information in it. At the end of the paragraph, be sure to say that you reject the new terms.
Meanwhile, be sure to include a copy of the letter that the card company sent to you. That way there won't be any ambiguity about what you're doing. The company will know what you're rejecting. Do this even if the company says that you can opt out by phone. You can't keep a paper trail if you're using the phone. Which reminds me. Make sure that the company sends you a letter confirming your request. You need to have a letter proving that you actually opted out. Call and request a letter from the bank.
By the way, for those of you wondering, Nordstrom Bank's recently-announced interest-rate hike does not allow customers to opt out. The rate will go into effect, whether you like it or not. Even if you decide to close your account, the new interest rate (on your closed account) will be applied to your balance. It doesn't get more harsh than that (story link here).