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Be careful if you’re thinking about applying for Costco’s new Citibank credit card

Costco Day IMG_8807_2When I went to Costco on Saturday, a salesman who wanted me to sign up for Costco’s new credit card from Citibank approached me.

Thinking it was the only credit card you could use at Costco now, since American Express is no longer accepted, I asked for details.

He pointed to a board that showed 4 percent cash back on eligible gas worldwide including gas at Costco; 3 percent cash back on restaurant and eligible travel purchases worldwide; 2 percent cash back on all other purchases from Costco and Costco.com; and 1 percent cash back on all other purchases.

I asked him what the interest rate is for the credit card, and he said 14 percent.

I said, “No thank you.” I can get about an 8 percent rate through credit unions I belong to.

He replied with all the cash back the interest wouldn’t be that much.

I wondered why the interest rate wasn’t posted. I looked on the Costco website. The annual percentage rate for the Citibank card is seven months for 0 percent, after that, the variable APR will be 15.49 percent.

I wonder why Costco has selected a Citibank card with such a high interest.

The average credit card debt in the United States is $15,310. The average household pays a total of $6,658 in interest per year, or 9 percent of their income, with $2,630 of that for credit card debt, according to a credit card report by NerdWallet, a personal finance website.

Another survey by Prosper, a lending website, found that just 37.4 percent of credit card holders pay their balance in full each month, and 15.9 percent pay only the minimum balance.

That means that many Costco customers using the Citibank card could be paying more than 15 percent interest on balances of more than $15,000 for decades.

In addition, the federal government has fined Citibank for fraudulent business practices. Read about it here and here.

I tried to contact Costco to ask why this expensive Citibank credit card is being offered, but its Member Service Center would only give me the main number at Costco headquarters in Issaquah, Washington. The operator then several people I was referred to didn’t know how to contact the Costco public relations staff, if they have one.

Note: Costco now accepts all Visa cards.

Copyright 2016, Rita R. Robison, Consumer Specialist

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