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19.99% APR On My Citi Credit Card, True Cost of Credit

This article was written by in Credit. 10 comments.

Editors Note: The rates in this article reflect the authors credit card rates at the time this article was originally written, these rates do not reflect current credit card rates.

Because I check my credit card activity online almost every day to ensure nothing unexpected has been charged to me, it’s rare that I examine my paper statements. I usually look through the envelopes to make sure there aren’t any notices identifying any significant changes in the user agreement, such as a requirement to sign my first-born child over to the credit card company if I accidentally pay my bill late some day. In reality, however, I more often stick the unopened envelopes into a folder.

I was in for a surprise. This past weekend, I opened the latest statement from Citibank. They’ve redesigned the statement, probably to comply with the Credit CARD Act of 2009, and 29.99% caught my eye immediately. This usurious rate is what I would need to begin paying if Citi were not to receive my payment by the due date. I looked further into the statement to find the interest rate for standard purchases, and I was surprised to see it was 19.99% APR.

I don’t pay any interest because at this stage, and for as long as I can, I pay my credit card balance in full every month. So the interest rate doesn’t affect me. I won’t be calling Citi in anger, at least not for this reason. But that doesn’t mean I’m not contributing to the growth of the credit card industry. Even if I’m not paying any fees to use my credit card — in fact, I’m earning cash-back rewards — every time I purchase something I contribute to an overall increase in prices.

Merchants pay an interchange fee to process credit card and debit card transactions, and that fee varies depending on the type of card. To put this idea into real numbers, I entered my credit card information (just the first six digits of each card, nothing personally identifiable) into the True Cost of Credit calculator.

Here were my results. The table below contains several different types of purchases, and for each purchase, the fee the merchant would owe for credit card processing. The numbers aren’t very surprising.

Citi Dividend
World MasterCard
BoA Visa
AmEx Blue Cash
for Business
Convenience Store
Pack of Gum ($1.50)
$0.28 $0.37 $0.30
Sandwhich Shop
Sandwich ($7.00)
$0.36 $0.36 $0.45
Pizza Restaurant
Pizza Delivery ($25.00)
$0.85 $0.84 $1.13
Gas Station
Full Tank ($30.00)
$0.71 $0.64 $1.15
Online Retailer
Books ($50.00)
$1.17 $1.14 $1.80
Grocery Store
Groceries ($100.00)
$1.56 $1.52 $3.55
Electric Company
Bill Paid Over Phone ($150.00)
$1.02 $1.11 $5.26
Online Travel
Flight to California ($300.00)
$6.92 $6.76 $10.51
Electronics Store
Flat Screen TV ($800.00)
$19.59 $19.05 $28.01

The credit card industry is receiving anywhere from just underneath 1% to 25% of every transaction that occurs, though that amount may be split between a merchant servicing company, a bank, and the issuer (Visa, MasterCard, or American Express). Yet even with this practically guaranteed income, some credit card companies now want to start charging additional fees to those of us who pay our balances in full every month.

Take your cards for a spin to see how much the credit card industry is earning from you, not including increased spending due to the convenience and psychological appeal of credit cards, even if you don’t pay interest or late fees. It would be interesting to see how a store-branded credit card compares.

Photo credit: rahego

Updated December 20, 2015 and originally published January 19, 2010.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

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{ 5 comments… read them below or add one }

avatar 1 Anonymous

Very interesting. I guess I realized that retailers had to pay the fee, but the price increase dilemma had never occurred to me. Is it therefore our duty as responsible consumers to dump our rewards credit cards and start living cash-only lifestyles?

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avatar 2 Anonymous

I don’t care about APRs either but all of mine are below 14% with the lowest being 9%

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avatar 3 Anonymous

Some of the rates on my credit cards are outrageous but I’m not really concerned about them. Most of them have no balance and the two that I use offer rewards and the balance is paid in full each month so I pay no interest.
– Single Guy Money

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avatar 4 Anonymous

You said “Yet even with this practically guaranteed income, some credit card companies now want to start charging additional fees to those of us who pay our balances in full every month.”

Maybe I’m reading too much, but it sounds like you’re saying they shouldn’t?

Credit card companies will make every dime that they can in every way that they can. Since they show us no allegiance, we should show them the same. If you’re in a position to change, do so (or at least threaten) when they change the T&C’s. I won’t pay an annual fee or interest. I’ll simply surf to another card.

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avatar 5 Anonymous

It’s certainly possible to be responsible when owning a credit card, but when interest rates change so rapidly, isn’t it disconcerting? Would fluctuation in any other market be tolerated?

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