Citibank called me this afternoon asking me whether I would like to put an installment plan on a previous transaction of HK$1,400. You must be joking I thought. I have previous read their new flexible installment plan leaflet: you don’t pay interest but you do plan a monthly “handling fee”, which is equivalent to an annual interest rate starting from about 6%. The thing is these days you could buy anything over HK$2K with interest free credit card monthly installment plan, so there really is little incentive to go for Citibank’s latest plan.
For any other bank I would have just hanged up, but I have been with Citibank a long time and they have been okay w/ me so I politely insisted that I didn’t want to put HK$1,400 on installment, and that I might consider it if the need ever arise. For a split of a second I considered telling them that I would soon be buying a dozen 40” plasma TV panels for home use and I’ll put that on their installment plan.
I believe that no sensible person would bother putting HK$1,400 on an installment plan and pay 6% annual interest on it. The telephone conversation between the Citibank staff and me was a complete waste of time. To Citibank it was a waste which should have been better spent at approaching a more likely target customer. OTOH if I were Citibank and I found that one of my customers couldn’t afford to pay HK$1,400 in one go but have to put it on an installment plan I would be extremely concerned about this customer’s financial stability and would probably consider freezing his/her account.
5 responses so far ↓
1 James // Sep 30, 2004 at 9:10 am
Citibank’s credit card loan is nothing but a hoax. They charge interests and service charges on the entire unpaid balance of the card which includes the card balance, loan balance, as well as the installment balance. Yet the only possible card payment you make is automatically seperated and shared by the bank across the card payment as well as the loan payment in the same percentages as the ratio of the balances. That means, if you have installment purchases on top of your continuing regular card spendings and your card loan, essentially, you would almost never be able to finish paying them off and hence a very large sum of interest payment making the total amount owing even more difficult to pay off.
2 tin_the_fatty // Sep 30, 2004 at 4:20 pm
Ain’t this the norm w/ all credit cards, i.e. charging very high interest for any unpaid balance? Making additional spendings on a credit card w/o the ability to pay the monthly balance is pretty much financial suicide.
As for passing a credit card loan as a personal loan, well, caveat emptor. It only annoys me when they call to push it, taking their valued customers as gullible.
3 James // Sep 30, 2004 at 7:12 pm
HSB have two separate accounts for their credit card and their revolving loan. So you can pay them both off at the same time and owe no interests to the bank. Whereas Citibank only accept one single payment for their credit card as well as their credit card loan.
Say you spend $1000 per month with the credit card. You then borrow $12000 from them with your credit card account for a low interest loan (a loan, not a installment purchase). HSB would charge you $1000 credit card payment and $12000 loan. Say you pay them $1000 for the credit card payment and $1000 for the low interest loan payment, there you have paid off the entire credit card balance. Whereas Citibank works out that you owe them a total of $13000 for that first month. You pay them the same $2000 as you would with HSB, and Citibank works out 1/13th ($1000 vs $12000) of that $2000 or the minimum payment amount and pay towards the credit card balance and with 12/13th of that $2000 towards the loan payment. So only $153.85 of that $1000 credit card balance is paid off and there you owe them $846.15 credit card balance and get charged with that 30% credit card interest on top of the rest of the loan in their “low insterest” rate! Installment purchases however work out the same way as other banks.
When I told Citibank that is the reason I’d never use their credit card to borrow any money from them, they told me to just use their card to borrow money and never use it as credit card for anything else.
Yeah sure, like I was born to borrow.
4 tin_the_fatty // Sep 30, 2004 at 10:36 pm
Credit card loans (or more like cash advances) are never cheap so I avoid them, period.
Their “advice” for you to just use their card for loan is fair. To the big corporations the sole reason for your existence is for their profit. They would be more than happy to offer you another Master/VISA so you could make your purchases.
5 James // Oct 1, 2004 at 1:19 am
They weren’t a credit card cash advance. They were advertized as low interest loans for being their “chosen” customer, except when you actually ask them how to pay off the loan and the credit card purchases, then they would try to mumbojumbo you into it unless you kept on beating them with an answer.