The Best Credit Card Business No One Talks About

There are a number of great credit card businesses. There's one, however, that never seems to get the attention it deserves.

Apr 12, 2014 at 9:00AM

Citi Credit Card

When it comes to great credit card businesses, American Express (NYSE:AXP) and Discover Financial (NYSE:DFS) seem to always assert themselves toward the top of the list – and for good reason. There's one company, however, that never seems to get enough love. 

Citigroup (NYSE:C), believe it or not, is the world's largest issuer of credit cards. This business struggled with the rest of the company during the financial crisis. However, the leadership of CEO of Citi cards, Jud Linville, has righted the ship and turned Citigroup in to a credit card company to be reckoned with. 

American Express and Discover use a closed-loop model. This means that it both issues cards and acquiring merchants. This allows Discover and American Express to analyze trends and create more targeted rewards programs. Since information never leaves its network, it also stays more secure. 

While a closed-loop strategy is often considered the gold standard, it does come with one big limitation: distribution. To combat this issue, Discover and American Express will enter into relationships with bigger or international banks. 

Citigroup uses an open-loop model, issuing cards onto Visa's and MasterCard's networks. Citigroup's unique global footprint, mixed with the ease of issuing cards onto a readily accepted network, has allowed the company to become the world's leader in card distribution with 142 million accounts. 

Customer appeal
When it comes to traditional customer service, there are few if any that can top Discover and America Express. As mentioned, the model that the companies use gives them a huge advantage in this department.

Even just a few years ago, Citi cards sported a net promoter score of zero. This means there were just as many customers that would recommend Citi cards as there were who wouldn't. Over the past three years, the business has improved its net promoter score to positive 50%. This is still a far cry from American Express and Discover, but it's a big step in the right direction. 

Customer appeal also means having products people enjoy using. Again, just three years ago, Citigroup's credit cards and fraud detection were in shambles. Since then, the company has simplified its product offerings and made rewards cards more rewarding. The company also gave its fraud detection a much needed facelift. This included implementing a new cutting-edge infrastructure. According to Linville, the net promoter score on fraud detection had improved "tenfold." 

Show me the money
OK, so Citigroup has great distribution, and has made a valiant effort to improve its customer appeal. Do the cards make any money? Oh yes. In fact, Citi cards stacks up well next to American Express and Discover.

The first thing that pops out is Citi's jump in income from 2010 to 2011. That was primarily due to a $5 billion decline in net credit losses, meaning more loans were getting paid off. 

Looking forward, Citi card's loans could be at greater risk of default as it serves a larger portion of the population, at least compared the affluent focused American Express. However, in the past few years, its been even more efficient at turning revenue into income when compared to American Express. Overall, investors shouldn't be surprised to see Citi cards more than keep pace. 

Bottom line
Citigroup can be broken into two businesses: Citi Holdings, which the company is actively attempting to wind down, and its core banking business Citicorp. In 2013, Citi cards accounted for $1 out of every $3 earned by Citicorp.

This is a fantastic business that more than holds its own compared to the industry titans, and it will be a huge driver for Citigroup. So the next time you talk about the best credit card companies, don't forget about the hidden gem at Citigroup.

Is Citigroup ready for the post-credit card age?
The plastic in your wallet is about to go the way of the typewriter, the VCR, and the 8-track tape player. When it does, a handful of investors could stand to get very rich. You can join them -- but you must act now. An eye-opening new presentation reveals the full story on why your credit card is about to be worthless -- and highlights one little-known company sitting at the epicenter of an earth-shaking movement that could hand early investors the kind of profits we haven't seen since the dot-com days. Click here to watch this stunning video.

Dave Koppenheffer owns shares of Citigroup. The Motley Fool recommends American Express. The Motley Fool owns shares of Citigroup and Discover Financial Services. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers