Yesterday I wrote about how Citi will kill nearly all of their card benefits, from price drop protection to return protection and from rental car insurance to travel insurance, and much more.
Citi’s bet is that people won’t care about the lost benefits and won’t switch to other cards because of them. The problem is that if they’re correct, other banks may follow as well.
The news is gaining some mainstream coverage, but I was left flabbergasted after reading this Bloomberg article.
First of all, they quote Citi as saying,
“Citi continuously evaluates our products to ensure that associated benefits best meet the needs of our customers,” the New York-based company said in an emailed statement, citing “sustained low usage” of the rewards being discontinued.”
The whole point of insurance is that you don’t want to have to use it, but it’s good to know that it’s there when you do. Obviously there’s going to be a low uptake on that, but I’ve saved a fortune in Israel by just having credit card car rental insurance, which means I don’t have to pay for overpriced rental car insurance there. I’ve also successfully won disputes against rental car agencies thanks to having that coverage.
If Citibank was paying too much to insure protections that were underutilized, maybe they should have brought the benefits in house and self-insured them?
Other benefits, like price drop protection, were more likely killed by apps that automated the process, making it much costlier for credit card companies. Other banks have cracked down on that benefit as well, but they haven’t axed their other benefits.
Things get worse from there.
Bloomberg writes about Citi’s new offering (timed to launch with the announcement of the death of their card benefits so that news coverage would focus on that) that it will,
“alert customers any time they make purchases eligible to be paid using ThankYou points. Card holders will be able to select what purchases they would like to redeem for points using the bank’s mobile app. Each point will be valued at 0.8 cents when redeemed using Pay With Points, so an $8 purchase would require 1,000 points.”
That is one terrible use of points! With my Citi Premier® Card I can redeem points for gift cards at a value of 1 cent each, redeem points for airfare at a value of 1.25 cents each, or transfer points to miles where they can be worth 2 cents each or more.
Why in the world would I ever redeem my points for 0.8 cents each?
And yet they quote Mary Hines, the head of customer engagement and innovation (I guess the innovation is for how to get customers to redeem their points for less costly rewards?) for Citigroup’s branded cards business as saying,
“Our customers work hard to earn these points and we want to make these points as rewarding as possible…A recent Citigroup survey of 1,000 cardholders found that customers were 86% more likely to redeem rewards points if they could be used in real time.”
As rewarding as possible?
I’m going to go out on a limb and guess that they didn’t actually tell those 1,000 customers how poor of a value the real time rewards program would be.
Me, after reading the article:
What do you think of this program “enhancement?”
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51 Comments On "Citi Replaces All Of Their Card Benefits With A Terrible New Way To Use Points"
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Does this affect double cash rewards?
https://www.dansdeals.com/credit-cards/brutal-citi-will-nuke-credit-card-benefits-protections-will-banks-follow/
So, it will still get 2% cash back, but no other perks. For me, that’s the most important as I don’t do that much traveling or car renting, and don’t use the purchase protection that much, but for those iffy purchases and final sales, I’m definitely switching to my Amex and hope they don’t follow Citi’s example.
Correct, but consider getting the Paypal Mastercard, which offers 2% cash back plus it has extended warranty and price drop protection.
https://www.dansdeals.com/credit-cards/earn-2-cash-back-pay-no-foreign-transaction-fees-paypal-cashback-mastercard/
The association with PayPal creeps me out.
signed up for this with great credit history. They only gave me $300 credit limit. Worthless.
I wonder if .8 is what they pay the airlines.
They pay much more than that.
Was going to apply for a card for thank you points – is it still worth it?
doesnt look like, id go for a chase card or an amex card
A 60K signup bonus is certainly nothing to sneeze at:
https://www.dansdeals.com/credit-cards/earn-60000-thankyou-points-highest-ever-limited-time-offer-citi-premier-card/
But the card’s protections are very poor compared to other cards now.
When will all of this go into effect
https://www.dansdeals.com/credit-cards/brutal-citi-will-nuke-credit-card-benefits-protections-will-banks-follow/
It’s no wonder Citi is partners with with #Aadisadvantage…they are a match made in #notheaven!
Amen. Truly a match made in heaven.
Ok, but what about the citi aadvantage card? It only earned AA points and now lost all benefits?
It will still offer free checked bags and priority boarding.
The benefits being eliminated are listed here:
https://www.dansdeals.com/credit-cards/brutal-citi-will-nuke-credit-card-benefits-protections-will-banks-follow/
Is the AA Aviator card worthwhile now?
sorry about this but even if i transfer marriot today to aeroplan i still would get the 35% bonus
speaking of marriott, does marriott charge you to tranfer more then 35k?
דער עולם איז א גולם
If they send someone a message via their app that says “click here to instantly wipe out that last $80 purchase using 10,000 points,” they will get a lot of takers.
Unfortunately, I too fear that this is the case. And they’ll learn that offering people a horrible value actually works, and will devalue further.
Think I’m going to start using a debit card from now on.
Discover already did this with 5 of their benefits. I wonder if they felt any difference. I certainly think before using that card. Interestingly though, I wonder how they gauge the usage. As Dan mentions, he saved a load of money by relying on the card’s rental insurance. How do they know if you ‘used’ that? Based on claims filed? Same thing for Extended Warranty Protection and Purchase Protection – the fact that it is an option is a benefit though how can they know how much ‘usage’ there was unless claimed?!
A bit different with Discover, as there are no annual feels on their cards, so it’s more reasonable to axe this stuff without an uproar from the population they have. Definitely a good point though, it is hard to know how many people actually used the card for a purchase because of the benefit, when no claim was filed. It’s a bit easier for Car Rental than Purchase Protection- because at least you can see how often people put car rentals on their cards, since it only happens at those merchants (as opposed to Price Protection which is for any purchase). So, they will be able to see if now there is a downturn in people using their cards for car rentals, which I think there will be- people who rent cars I think are the kind of people who know how important the CC insurance is and will move their rentals to Chase/Amex. Question is, if it will be enough to get them to put that one back. Of all the things they dropped, car rental insurance is by far the most baffling, as virtually EVERY card with an annual fee has it in some form.
The truly sad thing about all this is that Citi is making a smart move. Especially that real time purchase eraser. Many people live in the “now” and would have trouble resisting such a prompt that would make them feel like they got something free/not hit them in their wallet.
Dan, I apologize if I missed it (currently Maui-brain), but I don’t recall seeing anything in the past two posts about the Citi AAdvantage Premier Exec benefits (free bags as Admiral Club). No changes announced for that card (yet)?
Sorry. I now see your reply above. You don’t mention Admiral’s Club, so presumably the (very lucrative) benefit is still alive, albeit perhaps on life support.
I believe most people don’t understand all this point mile thing and if they make it very easy to redeem than they got most of em happy.
And most people don’t know/bother with all this other benefits
I agree that Citi seemed to miss the boat on gaging it’s customers use of the insurance benefit, but disagree on your assumption that low redemption value will deter most from using points in real-time.
Most people here & ddf (probably including you) can attest that while we are avid points players, everyone around isn’t. In my case I’m always helping guide everyone around me through the best use-case of their points. And while people ask me because they do want to know the best use, their still not reading blogs and getting their PhD in points redemption. The general pop simply cbf. Therefore, citi is betting that by making it super easy to use, people will adopt. I bet they’re right. Most people will happily fork it over for pennies on the dollar.
Even if you don’t travel, is it that hard to get 25% more value by getting a gift card?
Do 86% of people really consider it more rewarding to get less?
who wants to be bothered to buy gift cards before purchasing?
You’re forgetting that people that are not in the points game will not even come across these Citi cards. Those people will usually have a debit card and maybe some version of a Chase Freedom. Therefore, the people that do have the Citi cards (especially the miles earning) will be closing accounts in a substantial number.
“Our customers work hard to earn these points and we want to make these points as rewarding as possible…A recent Citigroup survey of 1,000 cardholders found that customers were 86% more likely to redeem rewards points if they could be used in real time.”
This actually doesn’t surprise me…people are stupid – I could see a room of people being asked “Would you rather redeem your points for gift cards or redeem it for statement credits”
True, but my question is how was that phrased?
People may be stupid, but were they told that they would get 25% more value with gift cards? Or 56% more value with paid airfare? Or 100% more value with a mileage transfer?
Or did they just ask if you want instant rewards?
the vast majority of their customers never use their points for mileage/airfare. hence its not worth it to them.
heck, the vast majority of people probably don’t use their points at all, which was why they could give inordinate amount of value to the points that those who did use could take advantage of.
I’d argue that citi’s perspective is that, yes they are devaluing the points, but they are trying to make it more usable by the vast majority of their customers (and hence will cost them more money unless they devalue them)
So why in the world would anyone (that’s not in it for the points) get a Citi Premier or Prestige? If protections are going away, and the points don’t mean much, where’s the value? Why pay the Annual Fee?
one probably shouldn’t if one doesn’t get value out of it versus the free cards that are available.
Question could have easily been asked: “If you have 1000 points, would you rather go online and redeem them for a $10 gift card or just be able to pick charges on your bill and have $8 taken off.”
Bet you there are fools who say “$8!!! It’s cash off my bill!?!?!?!”
“A recent Citigroup survey of 1,000 cardholders found that customers were 86% more likely to redeem rewards points if they could be used in real time.”
I guess only 14% of the people surveyed were DDf’ers!
Dan, can you reach out to Chase to see if they plan to follow suit with the sapphire card?
If we all go and close our citicards, wont they get the message? at least the other banks wont drop the benes if they hear everyone’s closing their citicards. no?
Will stop using my Citcards, stay with Amex and Chase.
If I’m closing my card, where do you suggest is the best place to send the points to sit?
Following. Maybe send points to FlyingBlue at current bonus program?
Does anyone know if this will impact Citi’s relationship or benefits for the Costco card?
https://www.dansdeals.com/credit-cards/brutal-citi-will-nuke-credit-card-benefits-protections-will-banks-follow/#comment-1412639
is it known what they pay on average for the miles
what does this .8 cent a point compare to what it cost citi to buy the miles
The good side is that more clueless people will use their new devalued use of points.
Thereby not pushing the cc company to axe their more efficient ways of using points, as over all their point system is not costing them as much.
can you make a post about wells fargo credit cards?
you never wrote anything about them…
the vast majority of people who have credit cards don’t travel and don’t get much out of their point. Yes they would love to know they can use them in real time for something. In their minds getting gift cards isn’t using it in real time and they don’t value them as face value of the card. Perhaps in holiday season but I think Citibank certainly will get the vast majority of the points out there used in this way. I am fine with other banks following suit if this is an alternative but partner transfers are kept.