If you are not making Citibank credit card payments on time, this news is for you. Citibank India has sent a communication to its Citibank Indian Oil credit cardholders intimating them about a revision in the interest rate. The Citibank credit card interest rate on revolving credit has been increased.
Such revision of interest rate may have been sent to other kinds of Citibank cardholders as well. The statement reads that the revised interest rates applicable on the Citibank Credit Card account will be effective January 2020 statement. The new interest rate will be applicable on opening balance and further transactions including cash withdrawals.
Currently, there are four slabs of the interest rate being charged to the Citibank credit card holder — 37.2 per cent, 39 per cent, 40.8 per cent and 42 per cent. The new Citibank credit card interest rates as applicable to different users effective January 2020 will be 42 per cent, 42 per cent, 42 per cent and 43.2 per cent respectively. Those credit card holders which are currently on promotional rates sales will also be migrated to 42 per cent and 43.2 per cent in case of default.
It is compulsory for any credit cardholder to make a minimum payment of 5 per cent of the credit card outstanding amount by the due date. Failing to pay the mandatory credit card amount results in a penalty which can be Rs 300 or more in most credit cards. The balance can be carried forward to the next month.
However, in doing so, there are two implications as follows:
1. No interest-free period
Unless one has cleared the full outstanding dues, the interest-free period gets lapsed. In some cards, it is up to 51 days. The new purchases made without paying the card outstanding amount in full will not get any interest-free period.
2. Interest charges
The interest rate applied will be on a monthly basis on the amount not paid during the card billing cycle. If you have a habit of revolving credit each month, the annualised interest could be as high as 40 per cent or more in most credit cards.
Citibank credit card interest rate calculation
Assuming that a Card Member has paid only partially for the February outstanding, and the statement is generated on 17th March for Rs 5000 (including interest from the date of the transaction). Card Member makes a payment of Rs 2000 on 25th March, and purchase of Rs 1000 on 30th March. No further payment is made on the card until 17th April (i.e. 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:
Now, it will become more expensive for the credit card holder to revolve credit. One should, therefore, make sure to pay the entire Citibank credit card due amount well before the last date in order to save on interest cost.