Citicard Exec On Ending Universal Default: "It's Like Telling People You Stopped Beating Your Wife."

I was talking to a high-up marketing type person from Citicards recently and she wanted to know what Consumerist readers were complaining about with regards to the little plastic devil she pushes. She told me how Citicards had recently stopped doing Universal Default, which is where if you’re late on your payments with one creditor, other creditors get to treat you like you defaulted with them and spike your APR. She said she was personally appalled after finding out that her company had the policy in the first place, but then struggled with how to tell customers about it, because, she said, “It’s like telling people you stopped beating your wife.”

(I’m not certain about this one, but I think they only stopped doing Universal Default after the Senate held several hearings investigating some of the worst excesses of the credit card industry…).

I told her readers were complaining about APRs skyrocketing on perfectly good customers. She replied with a story about the Citi Dividend Card was put out with a 5% cashback reward. But the company was losing money left and right, so they had to to pull back and offer only 2%. There was a big backlash, but it was just a bad decision, it should have never been put out to market, she said. I pointed out that while that may be, to a customer it looks like a bait and switch.

I moved on to opaque contracts, some of which the Government Accountability Office (GAO) found in a 2006 usability study to be written at the 27th grade level. I said that these contracts made it easier for the company to control their customers if their customers can’t even understand what they’re signing.

She told me that all the contracts are in fact written at the 7th grade level and that the reason why it has legalese is that it’s written by lawyers.

Oh, ok, that makes it all better then! I didn’t have a computer with me but if I did I would have liked to pull up this section from the GAO survey where a usability consultant tackled the gnarly and inscrutable language in credit card contracts. He took a section from a real credit card contract and rewrote it in plain talk:

    “If at any time during any rolling consecutive twelve billing cycle period we do not receive two Minimum Payments by your payment due date or you exceed your credit limit twice, we may elect to automatically increase any and all of your standard APRs to the Penalty APRs. Your Penalty APRs on all existing an future unpaid balances will automatically revert to the standard APRs disclosed above if you make six consecutive Minimum Payments when due and you do not exceed your credit limit within the same time period”

Here’s it translated from Klepdor:

    “If you pay late or go over your credit limit twice in a year, the interest rate you pay on most things goes up to the default rate, currently 30.49%. It will go back down when you pay on time and do not go over your credit limit for six months.”

The upshot of my talk with the credit card lady is that I think the reason why companies are doing evil things to their customers is because the people making the decisions have become so insulated from the actual effects they’re having on people’s lives. That’s why I’m glad The Consumerist can provide a forum for real people to get their raw stories heard out in the world where they can hopefully pierce hearts and minds.

REFERENCE: Increased Complexity in Rates and Fees Heightens Need for More Effective Disclosures to Consumers [Government Accountability Office] (PDF)

(Photo: scottobear)


Edit Your Comment

  1. Sarge1985 says:

    Does this mean they are taking it seriously?

  2. mmstk101 says:

    I must either be a lawyer or a genius, because the legalese version totally made sense to me.

  3. cotr says:

    ahh.. 5% to 2%… the dividend card… id cancel it in a heartbeat if it wasnt my first card. junk.

  4. Franklin Comes Alive! says:


    Same here.

  5. cmdrsass says:

    @Sarge1985: “Taking it seriously” is now the equivalent of “first post” and just as moronic.

  6. smythe says:

    I’ve had Citi switch me twice now, I originally had the 5% card then got switch to the 2% card and just a few weeks ago switched to something else that I didn’t give much attention to.@camelontherun: Why not cancel? they closed your 5% card and issued a new one.. For credit rating purposed I don’t think its going to do much.

  7. Pop Socket says:

    Good start. Now get them to quit moving due dates around randomly and arbitrarily raising minimum payments just to trigger a late payment and/or default.

    They have plenty of arrows left in their quiver.

  8. pmathews says:


    I got it too, but it’s always nice to have things written out in English.

    On a side note:

    Why would somebody stop beating their wife?

  9. chiieddy says:

    It’s not just Citibank that’s pulling the switch. I have a Discover Fuel card that’s supposed to give me 5% back on all gas purchases. Of course, when fuel prices went through the roof, they changed it to 5% on the first $250 and 1% thereafter.

  10. mmstk101 says:



    terrible. but I laughed.

  11. unklegwar says:

    @cmdrsass: Some people just go for the obvious and overused…and then they proclaim that they are witty as all get-out.

    First and “taking it seriously” witticisms are right up there with “Where’s the beef?” on the wit-o-meter.

  12. BuddyGuyMontag says:

    @pmathews: Ask Ike Turner.

    That being said, the NY Post gets credit for one of the most wrong headlines ever.

    The day after Ike left this mortal coil, the post had this gem of a headline:

    “Ike Beats Tina to Death”

  13. Erwos says:

    Yeah, my cash-back card isn’t exactly as great as it could be, but anything is better than nothing, which was my previous situation.

  14. EBounding says:

    @chiieddy: Discover will give you 5% for up to $100 in gas. After that it’s just 1%.

  15. Traveshamockery says:

    @Sarge1985: Okay, you just ruined that joke for me. It was funny until now. Now it will never be funny again.

  16. A zero-balance is even sweeter than that. One less thing to worry about.

  17. BigElectricCat says:

    Solution: business behaves in ethical manner.

    Consequence: people not horrified, stop looking at business ‘as if it stopped beating its wife.’

    The fault is *not* with the appalled onlookers, Citi.

  18. jnews says:

    I think my last comment didn’t go through, so if this is duplicate, I apologize.

    The problem with the GAO interpretation, (“if you pay late … twice in a year”), who decides what “in a year” means? Is it a calendar year? A rolling 12 month window? The original phrasing was precise.

    If they wanted to make it easy, they should phrase everything in a cause-and-effect relationship, with numbers. Something like “Each time you make a late payment, the next 11 payments must be on time or your APR will switch to the penalty rate. You will stay at the penalty rate until you make 6 consecutive on-time payments. Then you will be switched to the regular rate.”

  19. m4ximusprim3 says:

    @pmathews: Spousal abuse is nothing to joke about. My wife ran away because of it.

  20. tedyc03 says:

    God I can’t believe I’m about to defend a credit card company…

    The “legalese” is better than the rewrite. First, it says that the period of time is rolling, not just any given year. A given year could mean January to December. The rolling and consecutive is necessary to leave no room for mistake. Also, they point out that they can raise ANY and ALL of your APRs at their election – meaning they won’t necessarily do it. Finally, they point out that you may be subject to more than one APR and that there may be different penalty rates.

    I like things in plain English but courts don’t like ambiguity. If the default rate wasn’t 30% and they weren’t evil, no one would complain about this contract. These kind of very specific points are included in EVERY contract in business leaving no room for error and ensuring that the parties have very specific rules to follow in honoring the contract.

    I still think Citibank is evil, along with the rest of the world’s banks. But people have an obligation to understand the contract they’re agreeing to follow, and if they don’t, they should ask for clarification, hire an attorney, or refuse to sign the agreement (by returning the card).

  21. Corydon says:

    I’d like to see a credit card statement that explains the math behind how they calculate their interest charges each month.

    I’d be cool with everything written out in an equation that makes sense to someone who made it through high school algebra.

    Even though it’s compound interest, you wouldn’t have to include any exponential functions if you’re just showing the interest over one time period.

    Something like:

    (Your starting balance + New charges – Payments received) * Monthly Interest Rate = Finance charge.

    Extra points for actually plugging in the customer’s actual figures for the month.

    Of course, that would show just how much charging that flat screen TV really cost, and we can’t have that!

  22. MeOhMy says:

    The “beating your wife” holds true far enough that they don’t need to feel embarassed about admitting it publicly – everybody in town already knew what was going on anyway and sincerely hopes that you really mean it this time and if not that your wife finally leaves you for good.

  23. fearuncertaintydoubt says:

    I had a citibank mastercard for over 15 years, since I was a sophomore in college. I was a good customer, though since about 2000 or so, I always paid my balance in full. In 2006, I received a letter notifying me that my citi card was being canceled due to negative credit report. I have a good income, low debt, and a credit score over 800. Turns out my brother defaulted on a loan and it showed up on my credit report for one credit agency.

    I thought this was a terrible way to treat a good-standing long time customer, and I will never give citi my business if I can help it.

  24. RvLeshrac says:


    Capital One, Citibank, and Chase already do that.

  25. humphrmi says:

    I told her readers were complaining about APRs skyrocketing on perfectly good customers. She replied with a story about the Citi Dividend Card was put out with a 5% cashback reward. But the company was losing money left and right, so they had to to pull back and offer only 2%.

    OK but that’s just one card, and the practice is far more widespread than this – what about all the other customers whose rates are arbitrarily raised?

    Also, at some point businesses have to learn that they can’t just change terms of contract that they later realize they don’t like. We all take a risk when we sign a contract – I take a risk that I’m paying more than I could somewhere else, they’re taking a risk of just the opposite (that they’re paying me more or charging me less than they could charge someone else). If I make a mistake, I have to live with it. If they make a mistake, they get to just change the terms.

  26. PunditGuy says:

    @ BuddyGuyMontag

    “Wrong” as in “incorrect,” or “wrong” as in “damn, that’s just wrong.”

  27. jpx72x says:

    @tedyc03: How dare you defend the credit card company! Don’t you know that the plain purpose of the CONSUMERist is to help consumers?!?!?!?! Who cares if your point is sensible, if it’s not pro-consumer, it’s blasphemy here. Waaaaaaaaaaaaaaaaaaaaaaaaaaaa!

    /Obvious sarcasm.
    //This kind of knee-jerk reaction is dumber than the “taking it seriously” schtick.

  28. ludwigk says:

    @cmdrsass: Meme’s on teh internetz? O RLY?

  29. econobiker says:

    “reason why companies are doing evil things to their customers is because the people making the decisions have become so insulated from the actual effects they’re having on people’s lives.”

    I would love to see the internal sweetheart card deals the execs at the credit card companies receive. If anyone could pry out that info that would probably show what a sham this industry is…

  30. synergy says:

    I read the untranslated paragraph and thought it was the translated one. Hmm. It isn’t that hard to understand…

  31. bigdtbone says:

    Formula for calculating compound interest

    A = P ( 1 + r/n )^nt

    P = principal amount (initial investment)
    r = annual interest rate (as a decimal)
    n = number of times the interest is compounded per year
    t = number of years
    A = amount after time t

    For the case of credit cards Principal = (balance) – (payment last month)

    But they also use continuously comppounded intrest (for those of us with scientific or accounting calculators thats “e”)

    So as soon as a charge to your card passes the grace period it begins to acrew interest as well.

    High School Algebra II, but still… Suck.

  32. bigdtbone says:

    Sorry, thats not correct for continuously compounded interest, here’s the formula for that. It’s been 15 years since Algebra II….


    where P is the principal amount, e is the base of the natural log, R is the rate per period, and T is the time (in the same units as the rate’s period), and A is the final amount.

    Even worse I might add…

  33. madanthony says:

    So what exactly is the 27th grade level? I mean, even if you figure 4 years of college would make you a 16th grader, where do you go from there? Does my MBA bump me up to a 19th grade level? Would I need a couple PHD’s and a JD to make it to 27th grade?

    I mean, the interest rate thing made sense to me, so I guess I already read at it. So I might as well get the degrees to back it up.

  34. Mr. Gunn says:

    mmstk101: yeah, if that’s the most complicated paragraph in the contract, I’d say they’re doing surprisingly well.

    It could always be clearer, though.

  35. Bill says:

    @madanthony: If you go read the report, it actually says 12th grade.

    I was wondering that myself :-)

  36. ConsumerAdvocacy1010 says:

    @chiieddy: I recently got the card. For me, it’s 5% for the first $100 fuel/maintenance…. and 1% thereafter. I’d take up to $250 in a heartbeat.

  37. AustinTXProgrammer says:

    Universal Default. Someone gets in a disagreement with one creditor, they end up defaulting on the rest because they can’t afford 30% interest.

    Or they call their mortgage servicer as their savings are being depleted and they are only going to be able to pay 3 or 4 more months, only to be told they have to be 45 days past due to speak with “Homeowners assistance”.

    You go 45 days past due and open a case with “Homeowners assistance”. You promptly call into the bank to bring the mortgage back up to current and are told by the polite man in collections that bringing it current will close your case (He could have just taken your money).

    You finally make progress with the mortgage servicer, but Citi jacks your interest from 8% to 30%, on 15k you ran up paying medical bills (with every intention of paying…) before becoming unemployed.

    I’m not bitter, no I’m not…

  38. artki says:

    You had a chat with a citicard exec? What’s up with that? Do a lot of companies call you to get the pulse of the consumer?

    Just curious.

  39. weakdome says:

    Is it bad that I read this article, not because I cared at all about Citibank, but because I really wanted to see some of the posts replying to the wife-beating comment?
    And, thanks for not letting me down, everybody!

  40. Pro-Pain says:

    These companies exist purely on making as much money off of you as they can. Think about that next time you sign one of these plastic bastards knowing full well you intend to use the card even though you can’t afford too…

  41. anatak says:

    @Troy F.: And everyone knows that the mental abuse is still going on and that its just a matter of time before you fly off the handle again and slap her in front of the neighbors.

    It’s not about apologizing for the beating. It’s about getting out of the relationship. Because while you love him, and he was your first, you know it will never end.

  42. vladthepaler says:

    Surprised you didn’t mention binding arbitration.

  43. chiieddy says:

    @EBounding: Bah, they changed the limit again, or I mixed it up with my former AAA card which was even worse.

  44. @madanthony: 27th grade, 12th grade, same difference. Anything beyond 12th grade is just showing off.

  45. So, I’m being raped by the credit card companies and beaten by my husband?

    Wastin’ away again, in S&M-ville….

  46. @Corydon: I’d like to see a credit card statement that explains the math behind how they calculate their interest charges each month.

    But that would encourage people to check the math. They might find another rounding error like the one found by a math professor of mine. They quietly fixed the error, credited him the difference, and I think they threw in something like a promotional rate.

  47. Garbanzo says:

    @madanthony: There’s also this tricky thing whereby someone who finishes a Ph.D. in 4 years is likely smarter than someone who finishes in 10 years. So the highest level I’d say is about 20th grade, declining thereafter.

  48. mythago says:

    The “it was written by lawyers” thing is a cop-out. If Citibank told their lawyers “You have to write this for a sixth-grade level and still have it be legally binding,” they’d find a way to do it.

    Also, if they told their PR folks “find a way to explain no more Universal Default and make it sound happy,” they’d do it.

    The Citi spokesperson is either dumb or lying. They can hire lawyers and copywriters capable of doing what they pretend they can’t do. Ergo, they actually want confusing language that screws their customers.

  49. chiieddy says:

    @chiieddy: Should clarify:

    You will earn a full 5% Cashback Bonus on your first $100 in gas and auto maintenance purchases (“G&A Purchases”) that are posted to your Account each billing period, up to a maximum of $1,200 each anniversary year. At the end of each billing period, we calculate your Cashback Bonus by multiplying your first $100 in G&A Purchases by 5.0% (.05) and all other G&A Purchases by up to 1.0% (.01) (see “All Other Purchases” section).