Citibank Closing ‘Everyday 6 Months At 0% Interest’ Mastercard
Citibank mailed this credit card to many former Home Depot credit card accountholders who had their store cards closed for inactivity
More than a year ago, many former Home Depot credit card customers who had their accounts closed for inactivity received an invitation from Citibank for a unique Mastercard that carried an “everyday six months at zero percent interest” offer on charges exceeding $300. Make a purchase over $99 and take three months to pay before interest charges applied. A card with this feature extended the ability for customers to create their own zero interest installment plans on big ticket purchases, handy for emergencies or for budgeting monthly payments without coughing up interest.
Unfortunately for these cardholders, the party is over. Not only is Citibank rescinding its offer, it’s closing your account, too. The company decided that in these times of banks not actually lending to people, loaning six months of their money to you without interest just doesn’t make much sense. Cardholders can pay off their existing balances under the original terms of the account, which means you may have up to six additional months to pay the balance off without incurring interest. But Citibank will decline any future purchases attempted after the end of February.
The collateral damage from Citibank’s decision will hit your credit report about a month after the line is closed. Any reduction in available credit changes your credit profile, reducing the percentage of available credit you have at your disposal. If you maintain high balances on your other credit cards, losing this available credit will reduce your FICO score, a critical measure lenders use to determine your credit worthiness.
Just 20 years ago, wise credit management meant not opening and maintaining too many credit lines. Creditors would deny additional credit if you had too many open credit card accounts. How times have changed. Today, closing accounts is considered a bad idea, often harmful to your credit worthiness.
That’s because lenders look at your total credit utilization and your total available credit. If you have $5,000 in credit card debt and hold credit cards with a combined credit limit of $6,000, your available credit is just $1,000. That means you are using nearly all of your available credit — a classic warning sign for lenders, with predictable interest rate increases and further credit line reductions the usual result. If you maintained $25,000 in available credit, using just $5,000 of it looks much better to creditors, who will praise your responsible credit management.
That is why it is usually a bad idea to close inactive or zero balance credit card accounts. They reduce your total available credit. It’s much better to throw cards in a box unused and keep credit lines open. If you’re afraid the temptation is too great, cut up the cards. If a bank increases your credit limit, do not request they rescind it. The only time it makes good financial sense to close an account is if the issuing bank introduces an annual fee. If they won’t waive it upon request, it may be a good time to retire the card.
When Citibank closes your Mastercard account, your total available credit will drop. You can mitigate the potential damage to your credit score by reviewing your other credit card accounts online. Some bank and store credit card accounts from retailers like Best Buy will offer automatic credit limit increases upon request that do not necessarily result in credit card report inquiries (something that can also reduce your score.)
Some offer a fixed increase to accept or reject (Best Buy), others ask you to request a specific dollar amount. Look for special “credit line increase” buttons after logging into your account with Citibank or American Express. Discover Card has an automated phone line to process credit line increases up to $2,000. In less than an hour, you can restore the credit line Citibank takes away when they close your Mastercard account. Just avoid those that disclose they will pull your credit report as a result of your request.
Such is the game of today’s credit card industry. Later this month, the “too late to do any good” credit card reform laws take effect. No more arbitrary interest rate increases, but then the days of fixed interest rates are largely over anyway.
