Citicard Credit Card Predatory Banking Practices

Ok. Let me begin this story by saying that I really like my Citicard Credit Card for two reasons

  1. Virtual Account Number — generate a temporary account number to use for online shopping.
  2. Cash Back — I spend a lot on my credit card, so the cash back is nice instead of stupid points or air miles.

But here is just what happened to me that I can not describe in any other way than predatory lending practices.

So last year I used Western Union to transfer money for a business transaction. I don’t ever use Western Union, but for this specific venture, the customer only accepted Western Union so I had no choice. At that time, I remember thinking that it was nice Western Union allowed me to send money using my credit card through the website. Great! Very convenient.

Little did I know that the Western Union payment got billed to my credit card as a Cash Advance. Ok, now this is getting dangerous. I know EXACTLY what a Cash Advance is. I see people do it all the time at the casinos. Deadbeats would burn through their bank roll, but because they have no self control, would walk to the ATM and start pulling money out of their Credit Card, usually at ludicrous interest rates like 20% and up.

I am not going to blame Citicard for this. I blame myself for not being aware of the situation, and failing to catch any warning that may have popped up. I also want to blame Western Union for not being more proactive in notifying users of this type of transactions.

However, what happened next is without a doubt CitiCard’s fault.

Just about every month, I pay off my credit card in full. Technically, if you pay off your credit card in full, you do not have to pay any interest. But I began noticing on my statement that every month I get charged an interest. At first, I thought it was a fluke. Perhaps I am behind on one of my payments, or they are charging me interest accrued from the statement date to the payment date. Who knows. It did not bother me much because it was only a small amount, and I thought if I continued to pay my balance in full every month, closer to the date of the statement, it would take care of itself.

I did this for several months, but then I got suspicious that it was not going away. So I called Citicard to ask them to look into it and tell what is going on. The first operator I spoke to, DID NOT know and could not explain to me why I was being charged interest. Ok.. so let me step back for a minute… Some of you credit “experts” may have read the paragraph before this and thought I was just an idiot who did not understand how credit card interest work, and you were going to dismiss my complaint as “uninformed consumer bitching”, but let me beg you to reconsider. You see.. even the  Citicard Customer Service Rep couldn’t explain to me what the charge was about. So, its not just me. In the same vein, they were not the one who told me that it was my Western Union transaction that was the offender. I figured that out for myself after combing through my statements. Up until that date, I really had no idea the Western Union charge was any different than my other credit card purchases.

To add insult to injury, the Citicard Rep did not know how I could fix the problem. They did not know what I am supposed to do to stop the interest charge. They said they would look into it and get back to me!

So a month go by and I get charged again. Now the total charges have equalled well over $50. A small amount in the scheme of things, but a huge headache in other respects. I called them again. This time a more knowledgeable Citicard Rep. helped me look into the problem. But even though this person seemed more knowledgeable, they still could not figure out the offending charge until I mentioned the Western Union transaction and provided the date which it occurred!

Ok.. whatever… I am just glad they found the problem. Now tell me. How do I fix it? Well, the answer is this. I have to pay my balance down to $0. Yes, pay my balance down to $0. If I do not pay my balance down to $0, the Cash Advance charge that accrued on my account MONTHS ago, would NOT be paid for. It will continue to hang around on my account and collect interset FOREVER.

Ok ok ok… Some of you are wondering, wait, you said you pay your account off in full every month. So what’s the problem? The problem is, paying off my “statement balance” in-full DOES NOT zero out the account. To zero out a credit card account, you have to pay whatever amount that is owed on it up to the minute you paid it. So sadly for me, because I use my credit card for everything, my account balance is never ever zero. Look, if you don’t understand what this means, I don’t have the time or expertise to explain it to you. Just trust me when I say that MOST people never pay their credit card down to zero. When you pay your “statement balance”, you are only paying a portion of your actual balance.

But back to my point. Citicard’s business rule made it so that I was perpetually STUCK in a cycle of paying interest for a charge that I thought I already paid off. Although I received a statement every month telling me how much I owed, and I dutifully paid it off, they failed to explain to me that it would not pay off my “cash advance” balance. It is also upsetting to me that although I paid my statement balance in full, they do not count that payment towards my “cash advance” balance for God knows what reasons.

Although I am told zeroing my balance would resolve the problem, I have no confidence that there will not be some other predatory rules to hold me hostage. Some possibilities I could think of includes

  1. I have to hold my balance at zero for a certain length of time, maybe 24 hours?
  2. I have to zero my balance the second the statement is issued
  3. Or maybe they expect me to Zero my balance, then OVERPAY the amount I owed in the “cash advance” column.

Moral of the story is.. I will be shopping for a new credit card. I have even considered going all cash — but that’s really far from possible at this moment.

  • a sympathizer

    Something similar to this happened to me a few years ago with another credit card company.  In my case, it wasn’t a cash advance fee but simply the fact that I carried a balance for several months and then tried to pay everything off.  I didn’t even use the credit card any more, but I kept getting these bills for a few dollars for residual interest charges for months, no matter how I tried to zero out my balance. It really is caused by the fact that interest is calculated on your balance each day you carry it, so you always owe a teeny bit more than your last statement.
          But there’s a simple solution, which you already hinted at. You mail them a check (yes, MAIL a paper check) along with your payment stub for slightly more than you owe them (I chose to overpay by $10 for $4 I owed them). They will have to accept your check, so this will immediately cancel all residual charges and interest, and you’ll be free from this vicious cycle.  This will NOT work through their online payment service, because the form will automatically spit back an error message that you cannot pay more than you owe (very tricky of them). It’ll take at least 3 months and a couple phone calls for them to finally reimburse you for the difference between your overpayment and the final residual interest, but at least you’ll be out of this black hole. (Too bad we can’t charge them late fees!)
        Be sure to mail your check EARLY in your billing cycle so there’s no danger it will arrive after your due date (some sleazy employees at another credit card company admitted to holding onto checks so they’d be late and the customer would owe a late fee).  Better yet, buy a Postal Service money order or bank cashier’s check to send to Citi (then they really have no excuses) and send it registered mail so there’s a record of when it was delivered. The subtext is also that you are not naive and they will be less likely to try to pull a fast one over on you.
       Let us know if this worked — best of luck!  

  • Prashanth Batchu

    This is not a practice that is specific to citi. This is how a typcial credit card works. You think you know only to realize that you’re screwed in a situation like this. But the silver lining in all this is that you now understand the difference between paying the total balance off and paying the statement balance. Here’s the golden rule.

    If in a month you had to pay interest on X amount of balance, be sure to pay off the total balances for the next two months in a row to avoid any interest again (till you end up not paying statement balance and begin to pay interest again..)

  • I had this happen on two credit cards that had big balances that I finally paid off (Chase Visa and Citi MasterCard). I simply emailed the credit card companies and complained and then they refunded the interest they charged back to me. Sometimes all it takes is a little complaining to get what you want. This really is an unfair business practice and they shouldn’t be allowed to get away with it!