By Candice Choi, AP Personal Finance Writer
NEW YORK (AP) — For Citibank credit card holders, there is one way to escape the bank's rate hikes currently under way: Meet a monthly spending requirement.
Those who meet the spending minimum — in some cases $750 a month — will be able to get a rebate on their total interest charges for that month. The rebate could cover some or all of the interest rate hike. Customers also need to make payments on time to qualify for the rebate.
Without giving specifics, Citi said the monthly spending requirements and interest rate hikes will vary depending on the cardholder's credit history.
About half of its customers will be able to erase 50% to 100% of their rate increases through the rebates. Citi said its rebates will be based on interest charges for an entire balance, not just monthly charges.
With 92 million credit cards in circulation last year, Citi was the second largest card issuer in the country, according to CreditCards.com. Chase was the largest with 119.4 million cards, and Bank of America was third with 80.2 million cards.The change by Citi comes as the industry rushes to adjust to sweeping reforms to start in February that will limit when and how much card issuers can hike interest rates. In a statement, Citi said the actions were necessary given elevated losses from souring loans and "regulatory changes that eliminate repricing for that risk."
The bank also noted that "customers who do more business with us will have the most opportunity to reduce their rates." Of course, consumers could need to spend more than they otherwise would to qualify.
That's the case for Lindsey Pappas, a 25-year-old public relations professional in San Francisco. She received a letter from Citi Wednesday that her interest rate was being hiked to 19.99%, up from 14.99%.
If she spends $750 a month, however, she can get a refund for part of the higher interest rate charges.