New Introductory Rate For Citibank Ready Credit
Citibank has just reduced the 2 year introductory interest rate on their Citibank Ready Credit product to 5.90% p.a. Compared with standard personal loans it's a very low offer for 2 years. But there are a few things to be aware of with the Ready Credit product before deciding if it's right for you.
Line of Credit
Citibank Ready Credit is a line of credit. This is different to a personal loan and in some ways more like a credit card. A line of credit has no fixed term which means you can take as long as you like to pay it off. That may sound appealing, but in reality it could put you in debt for much longer than you need to be.
Many car loans and personal loans need to be repaid within 5 or 7 years. A loan like this forces you into regular repayments, which may seem like a burden, but if you pay them each month you know that the term of the loan will come to an end.
With a line of credit you can make the minimum repayments, but it won't ever pay off your balance. Paying interest on consumer items (like a car, TV or holiday) after 10 or 15 years is financial slavery. And costs you a lot in interest!
The 5.90% p.a interest rate is an introductory rate for 2 years and is a great offer - even lower than the previous introductory offer that Citibank had with the Ready Credit product. But after the introductory period your interest rate reverts to the standard variable interest rate, which is currently 18.99% p.a - which is much more like carrying credit card debt.
Who Is Suited To A Line Of Credit?
Ready Credit and lines of credit in general will be more suitable for people who are disciplined with their money. A line of credit means that you can draw money at any time, without reapplying and without the need for approval. Once you are approved for Ready Credit you have $30,000 at your finger tips whenever you want it.
You only ever pay interest on the amount of money you have used. But unlike most credit cards there are no interest free days with Ready Credit. You use the debt facility and you start paying interest immediately. If you only use $1,000 of the available balance then you pay interest on the $1,000. But if you go on a spending spree and spend up to your $30,000 limit you'll be paying interest on the entire amount.
At 5.90% p.a a $30,000 balance is $1,770 in interest each year - which doesn't include paying anything off the principal amount. When the introductory period ends and you owe $30,000 and the interest rate is 18.99% p.a then you'll be paying a whopping $5,697 in interest per year! And paying that amount off doesn't reduce your principal.
For the undisciplined the line of credit can be an easy trap to fall into - especially with such an appealing introductory interest rate.
But if you are fiancially disciplined then a line of credit like Ready Credit could help improve your financial position. If you have some existing debts at higher interest rates and want to do some debt consolidation, then this product could work well if you have a view to paying it all off within 2 years.
Also if you have some up and down cashflow and just need to cover shortfalls in a cheaper method than some overdrafts, then Ready Credit may work for you. It also may be a good option if you want a car loan or some other type of personal loan that you think you will be able to pay of fairly quickly. And especially if you have choppy cashflow and can pay more some months and less in other months.
Benefits of Citibank Ready Credit
As another benefit the Citibank Ready Credit also carries lower fees than other traditional loans. It currently has a once off $69 establishment fee, but then no monthly fees, no annual fees and no account keeping fees.
You also get security coverage like purchase cover insurance - which protects against loss, theft or accidental damage on new personal goods when they are purchased with your Citibank Visa Debit Card. You also get extended warranty insurance and guaranteed pricing scheme when you purchase with the Visa Debit Card that comes with the Ready Credit account.
The 5.90% p.a introductory offer that has just started this week for Citibank Ready Credit is a cheap interest rate - but just make sure the product is right for you.