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Offer to Switch Citi Dividend to World Mastercard
Today I received a phone call from Citi welcoming me to the new Citi Diamond Preferred Rewards World Mastercard. They stated that my old Dividend card will automatically switch to the new card if I do nothing by June 30, but that I can keep my old card if I want.
Others have received the same offer, and I found some good discussion about the topic at Fat Wallet.
Many people are rejecting the offer. One of the reasons being that the new card has no credit limit, which can hurt your credit score. If you don’t have a credit limit, credit scoring companies often use your total balance as the limit. So instead of having a low credit utilization, you will have a high credit utilization (100%). And credit utilization accounts for 30 percent of your credit score.
If you receive the same offer, there are a few things to consider, and I recommend checking out the Fat Wallet discussion to compare the options. As for me, I think I will most likely reject the “upgrade”.
Written by Clint · May 23, 2007 · Filed Under Credit
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You are incorrect. You have a credit limit with the new World card. I allowed them to switch me. You have a credit limit established. Under the new card rules, you are allowed to go over your credit limit, but are required to at least pay the amount that you went over every month.
I was worried about the same thing, however I called and have been monitering my credit. It still shows the limit. The advantage is that if you want to make a large purchase on the card, you can pay it off that month and you will never have gone “over your limit”.
I was also involuntarily switched and the word on the street is that the “World” cards simply allow Citi to charge higher merchant transaction fees. It seems that nothing changes on the consumer end, besides the fact that you get a new black card and it messes up any automatic payments you have set up. My credit limit remained the same. I didn’t complain because the switch benefited me, as I was one of those TJMAXX customers who probably got their identity swiped in that credit card fiasco earlier this year. Oddly enough, my boyfriend just applied for a Diamond Preferred card last month, and he got the standard silver one, though I thought they were discontinuing them.
Mike is wrong! He better check his credit score monthly!!! Citibank reports your maxium limit to the Credit agencies as “0″. If you are carrying a balance (I transferred a 1.9% life balance from my other card) the credit reporting agencies will drop you score because you are over you revolving credit limit. Example: Card has a balance of $25,000 and a card limit (even though it is unlimited) of $50,000. Since Citibank reports your maximum limit as $0, you are over your limit with the $25,000 balance. Equafax and the others calculate this as over your maximum revolving credit limit and reports it at over 100%. They add all your lines maximum limits and divide it into your current reported balance.
This caused my scores to drop by 55 points. I call Citibank several times to try and get them to change the limit reporting amount to the maxumum utilization ($25,000 as exampled above). They refused and most could not understand the difference between maximum credit limit and maximum credit utilization. I gave up, and will close the card.
Phil is very close, but not entirely correct.
When creditors report “0″ as the maximum limit, the highest statement balance is used as your “limit” in the credit applications. For example, if your credit limit is 25k, but the highest your statement has ever closed at is 5k, the 5k is used in your utilization calculation. If you close at 4k later, your utilization shows up as 4000/5000 = 80% even though your only using 4000/25000=16%. That’s enough of a difference to dramatically lower your credit score.
If you close at one month close to 25k, then all harm is fixed because that high figure will be used from that point on. It’s an extra step, but it works.