The latest trend in the credit card industry is to offer cards with no late fees. Credit card companies have done surveys and learned that people despise late fees. More credit card companies are sending out solicitations that scream, "No Late Fees".
The latest and most prevalent offer of this type that we see heavily marketed in both print and TV media is the Citibank "Simplicity" Visa card which promotes "No Late fees as long as you make a purchase each month with the card".
What people do not realize is that instead of charging you late fees the companies are hitting you with punitive interest rates if your payment is late by 1 minute or more. Therefore, you will immediately see your interest rate jump from 13 or 14 percent to about 30 or even 40 percent in some cases.
You are automatically reported to the credit bureaus if you miss a payment so other creditors can now implement the Universal Default Rate. If you receive one of these offers in the mail, toss it immediately, as the offer is too good to be true.
Beware of Citibank's strategy behind this "No Late Fees" Visa. Here is what Citibank is trying to do to consumers to rope them in and hold them hostage since they are loosing revenue and market share to home equity loans as consumers use their homes to get loans and dump their high interest rate credit cards.
1) The ads promote the card with the slogan "Pay no late fees as long as you make a purchase each month with the card". The ad markets the card with the implied message "As long as I make one purchase a month with the card I can be late with my payment and not be penalized".
No where in the ads does Citibank disclose the punitive interest rate punishment if you pay late one time and how they will report you to thecredit bureau. Citibank wants the consumer to have this perception and not read the cardholder terms, as most people don't, because once you do pay late one time then Citibank has ruined you and now has a customer who has no other options except to pay what they charge you.
2) You have now made a late payment based on the pereception of the ad you saw and you did not read the cardholder terms before accepting and using the card. Citibank has placed you in default and your interest rate now jumps to 31% because the default rate is 24.99% plus prime if you make one late payment.
Citibank is also going to report you immediately to the credit bureau as late. Your FICO score now drops to a sub-prime level and you cannot get approved for another card so you can dump Citibank and transfer the balance because you have a late payment on your credit report. Citibank has won and they now have you where they want you so they can exploit you.
Your other credit cards companies may also implement the "Universal Default Rate" provision and your other credit card interest rates will jump to 27% and more all because of Citibank reporting you as late to the credit bureaus.
The moral to this is to not fall prey to Citibank's advertising and do not apply for this card because Citibank will ruin you if you do and it may be intentional, like posting your payment one day late so they can place you in default. Citibank's strategy is well thought out and most people will not see the hidden agenda that Citibank has planted with this card.
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