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Universal default is a controversial topic in the credit card industry, and is the practice of raising interest rates on all credit cards an individual has when that individual makes a payment late to one of their creditors. For example, if you have two credit cards issued through Citi, and another card through JP Morgan and you are late with one of your payments, universal default would allow the companies to raise the interest rates on all of the cards- not just the card you made the late payment to. The higher interest rate is applied to new charges as well as all existing debt.

In 2007, Citi decided to remove the Universal Default practice, as well as their anytime-anywhere rate changes, under which they could increase cardholder rates for any reason they felt necessary. They felt this indicated the company’s desire to put their customer’s first.

When the removal of the controversial practices was first announced, press was all over it and Citi gathered all of their consumer praise to show everyone that they were a credit card company that takes their consumers needs and wants into consideration. A handful of other card issuers soon followed suit, although there is currently no federal regulation that prohibits universal default practices. Citi of course expected that the removal of the controversial practices would send new cardholders running to apply for Citi issued credit card offers – but this has not been the case.

Due to the lack of desired response for getting new cardholders, Citi is now considering the Universal Default and anytime-anywhere rate change practices again- claiming they are necessary risk management tools- despite the criticism they receive from consumer advocates and the pending legislation and regulation to ban such practices by legislators and federal regulators currently under review.



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