APR
Annual percentage rate, or APR, is the interest rate charged if you don't pay off your credit card balance in full each billing cycle. Citi's own educational materials explain that most credit cards have a variable APR that can change based on market benchmarks such as the prime rate.
The prime rate is the interest rate banks charge to their most creditworthy customers. According to the Consumer Financial Protection Bureau, credit card APRs are expressed as the prime rate plus an APR margin, and the prime rate is typically set at 3 percent plus the target level of the federal funds rate established by the Federal Reserve.
Understanding the different types of APR is important because your card may have several rates applied to different transactions:
- Purchase APR: the rate applied to purchases made with a credit card.
- Cash advance APR: typically higher than the purchase APR, and interest usually starts accruing immediately on cash advances.
- Penalty APR: a higher rate applied if a payment is late or returned.
- Balance transfer APR: may apply to transferred balances and can be a lower promotional APR for a set period.
- Introductory APR: a low APR for purchases, balance transfers, or both, for a certain number of months.
- Fixed APR: generally remains the same over the life of the loan, but can be changed by the issuer with advance notice.
- Variable APR: can increase or decrease based on changes to the prime rate.
Sources: Citi.com, CNBC Select, Consumer Financial Protection Bureau
Balance Transfer Fees
A balance transfer is the use of an offer to transfer a balance from another account to your credit card, usually to take advantage of a lower interest rate. When you transfer a balance, you may be charged a fee—typically a percentage of the amount transferred. The standard fee for Citi cards is not provided in the sources cited here, but your Cardmember Agreement will list the exact percentage that applies to your account.
The Cardmember Agreement states the APR, the minimum amount due formula, annual fee (if any), and billing dispute rights. It also outlines the terms of balance transfers, including any applicable fees.
Sources: Citi.com, Consumer Financial Protection Bureau
Annual Fees
An annual fee is a yearly fee charged for holding a credit card. Not all cards have one, and some Citi cards may waive the fee for the first year as part of an introductory offer. The presence and amount of an annual fee are stated in your Cardmember Agreement.
Sources: Citi.com, CNBC Select
Foreign Transaction Fees
A foreign transaction fee is a charge for purchases made in a foreign currency or through a foreign bank. Whether your Citi card charges this fee depends on the specific card product. While some Citi cards do not charge a foreign transaction fee, the sources cited here do not specify which ones, so check your Cardmember Agreement to see if your card is subject to this fee.
Sources: Consumer Financial Protection Bureau
Late Payment Fees
If you make a late payment, you may be charged a late payment fee. The exact amount for Citi cards is not listed in the available sources, but it is typically stated in your Cardmember Agreement. Additionally, a penalty APR may be applied if a payment is late or returned, which is a higher rate than your standard purchase APR.
Sources: Citi.com, Consumer Financial Protection Bureau
Credit Limit Explanations
Your credit limit is the maximum amount you can charge on your card. Related terms include:
Available credit: your credit line minus your current balance and any pending charges.
Credit line: the total amount of credit extended to you by the card issuer.
Your credit limit is determined by the card issuer based on your creditworthiness and other factors, but the specific formula is not provided here. It is typically listed in your Cardmember Agreement or on your credit card statement.
Sources: Citi.com
Rewards Terminology
Citi cards often earn rewards, but the glossary should help you understand the language around them. Common terms include:
Rewards points: units earned on purchases that can be redeemed for cash, travel, or merchandise.
Cashback: a percentage of purchases returned as a statement credit or cash.
Redemption: the process of using your rewards for a benefit.
The specific rewards structure varies by card, and not all terms are defined in the sources provided. For details on your card's rewards program, refer to your Cardmember Agreement or the Citi website.
Sources: Citi.com
Introductory Offers
Introductory offers are promotional rates or benefits available for a limited time when you open a new credit card account. Common types include:
Bonus rewards: extra points or cashback after meeting a spending requirement within a specified period.
The exact terms of any introductory offer are outlined in your Cardmember Agreement. After the introductory period ends, the standard APR and fees apply.
Sources: Citi.com
Other Key Terms to Know
Here are a few more terms that are useful when managing your Citi credit card:
Billing cycle: the number of days between your last credit card statement date and your current statement date.
Grace period: the amount of time between the end of a billing cycle and when your bill is due, during which you typically won't be charged interest.
Cash advance: an instant loan from your credit card account, and interest may apply from the day of the advance.
Cardmember Agreement: the document that states your APR, fees, and other card terms.
Sources: Citi.com, CNBC Select
Frequently asked questions
What is the difference between APR and interest rate?
APR, or annual percentage rate, is the interest rate charged on your credit card balance if you don't pay it off in full each billing cycle. It is essentially the cost of borrowing expressed as a yearly rate. The interest rate is the numerical percentage, while APR is the broader term that includes the interest rate and may also incorporate certain fees. In credit card agreements, the APR is the rate you see and is used to calculate interest charges.
Sources: CNBC Select, Citi.comHow does a balance transfer fee affect my total cost?
A balance transfer fee is a charge you pay when you move a balance from another credit card to a Citi card. This fee is typically a percentage of the amount transferred, and it increases the total cost of your transfer. Even if you take advantage of a lower promotional APR, the fee can offset some of the savings. To understand the full cost, you need to factor in both the fee and the balance transfer APR.
Sources: Citi.comWhat is a foreign transaction fee and when do I pay it?
A foreign transaction fee is a charge applied when you make a purchase in a foreign currency or through a foreign bank. You pay it when you use your card for such transactions. The fee amount varies by card, and some Citi cards have no foreign transaction fee, but the specific cards and amounts are not covered in the sources cited. Check your Cardmember Agreement to see if your card charges this fee.
Sources: Consumer Financial Protection BureauCan I negotiate my annual fee?
Some card issuers may allow you to negotiate or waive the annual fee under certain circumstances. While the sources provided do not confirm whether Citi offers this option, it's a common practice among credit card issuers. The annual fee is a standard charge for many cards, and the terms are set in your Cardmember Agreement. It's best to contact Citi directly to ask about your specific card and situation.
Sources: Citi.com, CNBC SelectHow is my credit limit determined?
Your credit limit is set by the card issuer based on your creditworthiness, including your credit history, income, and other factors. The exact formula used by Citi is not provided in the sources. Your credit limit and available credit are typically shown on your card statement or in your online account.
Sources: Citi.comWhat is a variable APR?
A variable APR is an annual percentage rate that can change based on market benchmarks, such as the prime rate. When the prime rate goes up or down, your variable APR adjusts accordingly. Most credit cards, including many Citi cards, have a variable APR. The relationship is usually expressed as the prime rate plus a margin, as stated in your Cardmember Agreement.
Sources: Citi.com, Consumer Financial Protection BureauSources
- Credit Card Agreement — Consumer Financial Protection Bureau
- The Consumer Credit Card Market Report to Congress — Consumer Financial Protection Bureau
- What is an APR on a Credit Card? - Citi.com — Citi.com
- Glossary of General Financial Terms — Citi.com
- Most common credit card terms and definitions — CNBC Select