The change was effective immediately, according to Citigroup. However, whether or not other credit card issuers will follow suit remains to be seen.
Universal default occurs when a credit card company raises a customer's interest rates after that customer has made late payments on other creditors' bills. Those bills can include utility bills, credit card bills, and mortgage payments. Furthermore, the company can raise the interest rates if the consumer applies for other credit cards or loans.
Citigroup also announced that its "anytime for any reason" rate increases would be eliminated. This change is effective immediately for new customers and will go into effect for current customers by April. "Anytime for any reason" rate hikes are also common practice for credit card companies and allow them to raise interest rates and change the terms of a credit card whenever the company deems it necessary. Without the "anytime for any reason" clause, Citigroup's credit card terms may now change when the card expires and is replaced, which usually occurs after two years.
Under Citigroup's new policies, a customer's interest rates and fees will only increase if that customer makes a late payment to Citigroup, exceeds his or her credit limit, or pays the bill with a check that bounces.
Three weeks before Citigroup's announcement, Chase announced that they would no longer use double-cycle billing. Double-cycle billing occurs when a company applies interest charges based on a two-month period instead of a one-month period, leaving consumers paying interest on balances that may have already been paid off.
However, even though Citigroup and Chase are making positive changes, there are no guarantees that other credit card companies will follow their lead. It is important for consumers to carefully read over the terms of their credit card contract so they know if their credit card issuer could potentially use "universal default", the "any time for any reason" clause, or double-cycle billing.
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Although the moves by Citigroup and Chase will help some consumers with their credit card debt, these moves are voluntary as opposed to being legislated, meaning that the companies can change their minds at any time.
Furthermore, there are still many credit card companies out there using deceptive practices to hike their rates as a way of increasing profit. It will likely be a long time before all credit card companies end their inflated rate hikes and put customers first.