If you have credit card debt, a balance transfer may be the best way to get out of debt faster. And Citi has just made balance transfers a whole lot more appealing. You can now have a 0% interest rate for 21 months. That is a massive increase from the 18 months that they were offering earlier. You have to pay a 3% fee to transfer the debt. If you can’t afford to pay off your debt in 6 months or less, the savings can be dramatic.
Here is a simple example of how much you could save. If you have $10,000 of credit card debt at a 17% interest rate and make a payment of $300 per month, you will end up saving $2,069 over 21 months if you transfer the debt to Citi Simplicity. That savings includes the cost of the transfer fee.
Credit cards do not have a great reputation. They lure you in with flashy marketing and a big sign-on bonus, only to hit you with late fees and penalty interest rates if you make a mistake. Citi has tried to create a simpler credit card that eliminates the confusing fine print. And they have rather ambitiously named the card “Citi Simplicity.”
How the card works
If you are looking for rewards on your spending, this is not the credit card for you. The Simplicity credit card does not offer rewards.
There are two parts to the Citi Simplicity story:
- An amazing introductory offer on spending and balance transfers that can help you save a lot of money, and
- A rather ordinary-looking credit card that has eliminated the most egregious credit card charges, but is still an expensive way to borrow money and has some other hidden costly traps
The Introductory Offer
The Citi Simplicity credit card has one of the best introductory offers in the market. There are two parts to the intro offer:
- 0% interest charged on purchases for 21 months, and
- 0% interest charged on balance transfers for 21 months. There is a 3% balance transfer fee
The offer used to be 18 months at 0%, and Citi has extended that offer dramatically, to 21 months. The savings for people with credit card debt can be enormous.
If you need to finance a purchase, then applying for a Citi Simplicity credit card and using it to make a purchase is the best way to get a true 0% offer.
There is a big difference between deferred interest and waived interest. In a deferred interest offer, you have to pay the balance in full before the promotional period is over. If you don’t pay the balance in full, than you will be charged interest retroactively from the date of the purchase. Fortunately, Citi Simplicity waives the interest. So, if you still have a balance remaining in month 22, interest will only be charged on a go-forward basis. It’s truly 0% for the first 21 months.
If you want to compare Citi Simplicity to the other balance transfer offers available on the market, you can do that here.
If you have debt, Citi Simplicity can be a great way of cutting your interest expense and paying off your debt faster. Just remember that:
- You have to complete your balance transfer within four months of opening the account, otherwise you do not receive the promotional rate
- If you are 60 days late on a payment, you can lose your promotional rate
Life After the Intro Offer
After the intro offer, the card starts to look a lot more ordinary. Like most cards without rewards, Simplicity does not charge an annual fee. There are three places where Simplicity has decided to stand out:
- No late fee
- No penalty pricing
- The same interest rate on purchases and cash advances
Lets look at each of those promises in more detail:
Late fees can be outrageous on credit cards, with some banks charging $30 or more. We applaud Citi for waiving the late fee on this account. However, they still have a returned payment fee up to $35. So, if you write a check that bounces, be prepared to pay for it.
And remember that late fees can still get you into trouble in other ways. Once you are 30 days late, Citi would report that information to the credit bureau. That will hurt your credit score, which could result in higher interest rates elsewhere, on other products. Just because there is no late fee does not mean that there aren’t expensive consequences elsewhere.
Penalty pricing used to be easy money for the credit card industry. They could find a reason to increase the interest rate on your existing balance, and then just do it. I have seen some horrible examples of people receiving massive interest rate increases without ever having missed a single payment. However, the CARD Act made that illegal. Now, the only way that credit card companies can reprice is on your go forward purchases. And Citi has taken a leading role, promising not to charge penalty interest rates. Although mistakes can be expensive, Citi is making them cost a bit less with this feature.
Same Interest Rate for Purchases and Cash Advances
Credit card companies have, over time, increased the interest rate on cash advances dramatically. It is not unusual to see a cash advance APR near 30%, and without a grace period.
Citi has decided to keep the same price for purchases and cash advances.
There is only one problem: the interest rates are high, and you don’t know your interest rate until after you apply and are approved. The interest rate on Citi Simplicity ranges from 13.49% to 23.49%, depending upon your score.
If you plan on traveling outside of the country, Citi Simplicity still charges the pesky 2% foreign exchange fee. That can add up quickly.
If you already have debt and are looking for a way to reduce the interest rate and pay down your debt quicker, the 21 months balance transfer offer from Citi Simplicity is an excellent deal that could take years off your debt repayment.
Just make sure you complete the balance transfer within four months, make your payments on time and don’t spend on the card. Your goal should be to get out of debt, and this card can be a great tool.