Citibank has changed the terms of Victor’s credit card agreement, and in the process they’ve created a bizarre rolling refund arrangement that will make his interest rate jump to 29.99 percent, except that actually it won’t, eventually. Maybe. Update: Another reader sent us a copy of the letter, and the arrangement is even less favorable than we first thought (see below).

Here’s what Victor wrote:

We finally got one of the letters we’ve been reading about on Consumerist, but this one has a twist.

Citibank is raising the interest on our paid-on-time, good status gold card to 29.99% on November 30, 2009. BUT, they’ll give us a rebate on the last 10% of the rate 90 days later on a rolling basis if we continue to pay on time. So charging something, leaving it on the account will incur 29.99% interest on December 1st, but we’ll get the 10% part of that back in March, and every month after that.

This seems very convoluted and is definitely annoying. For us, it means that we have a 19.99% rate, but with a 90 day perpetual delay. Fortunately we have a small balance on this card. We’ve decided to just pay off the card and stick it in a drawer before November 30th. This is too stupid to deal with.

But it turns out that what Citibank is offering isn’t a 10% reduction in your interest rate, merely a 10% rebate on the interest you paid under the new rate. Our reader Zclyh3 sent us a copy of the letter, which you can expand to read yourself if you like (click the image to enlarge). We copied the part that explains how the new plan works:

Earn interest back every month.

Here’s how — make your payment on time every month.

Each month you do, you will receive a credit on your billing statement equal to 10% of your total interest charge on purchase balances. This can help offset the increase in your purchase APR. Start earning interest back in December and January, and you will see the full credit on your statement no later than February 2010 and monthly after that.

If in any month you do not pay on time, you may not be eligible to continue to participate in this program.

(Photo: TheTruthAbout…)

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