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Here you are, enjoying a nice low interest rate. But, at the other end of that great deal, watch out. A much higher interest rate could be waiting for you and all the charges you have racked up.
Elizabeth Macfarlane was pleasantly surprised when Citibank offered her a little perk, a temporary low interest rate on the credit card she has had for 20 years.
"We'd like to offer you this, not the introductory, but promotional rate 'til July," she recalled them saying. "So, I said sure."
It happened in October 2008 when she called the bank to collect her "thank you points" reward. Instead of the usual gift card, the bank offered to reduce her 12-percent interest rate by almost half, to 6.99 percent. It would stay there for a period of nine months.
"I thought well great. That's about four percent less. No, actually it was almost six percent less. So, that could save me some money for a while," she said.
It did save her money. Starting last October, her rate went down to 6.99 percent. All was fine until her 9-month promotion expired in July.
Then, came the big shock.
"I got this little notice in the mail," she recalled. "I was crying. Actually, I couldn't believe it. I just couldn't believe it."
Her low interest rate was not only expiring; it was exploding. The notice said her new rate would be 29.99 percent. There was no way she could afford the payments. Macfarlane said she never got in writing what her rate would be after the promotion, but she never dreamed it would end like that.
"They need to be honest. Like, we're going to do this for a certain amount of time but then you might have to take your chances and go to something completely different," she told ABC7. "Do they really expect you to pay these payments at 30-percent interest?"
Joe Ridout with Consumer Action says, "To end the promotional rate and impose a higher interest rate seems perfectly reasonable. But, to have it exceed what the original rate had been seems very deceptive."
Ridout says big rate hikes like this are legal until stricter controls take effect in February. Still, a warning would have been nice.
"It's understandable that a cardholder would expect that rate to increase, but to go back to where it had originally been, not shoot up into the stratosphere," Ridout says.
MacFarlane called Citi Bank which said she could close the account and they would charge her just 24.99 percent interest. That rate was still way too much.
"I didn't know what to do," she said. "And, my husband had seen another show with Mike Finney..."
They contacted 7 on Your Side, who called Citibank. The company said the expiration of her promotional rate happened to coincide with a broader increase in Citi Bank's credit card rates, one which hit MacFarlane in July.
"We have adjusted pricing and card terms for some customers as part of our regular account reviews," the company said in a statement. "This is an ongoing process to ensure we offer terms, interest rates, credit lines and products based on individual needs and risk profiles. These changes also reflect the dramatically-higher cost of doing business in our industry."
Citibank reviewed MacFarlane's case and agreed to reduce her rate to 10 percent if she closed her account. She gladly accepted the deak
"It is workable for me now," she said. "I just want to thank ABC7 News, and Michael Finney, and the whole station for helping me."
If you get a low introductory or promotional rate, ask ahead of timewhat your interest rate is going to be when the special offer is over. Until the laws change in Februaruy, the banks can change their rates at will, any time they want, for whatever reason, as long as they give younotice and a right to opt out.
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