Citi Can’t Take The “Competitive Heat” When It Comes To Travel Rewards Cards

Filed Under: Credit Cards

The premium card space has really heated up in the past few years. Back in the day the Amex Platinum Card basically didn’t have any competitors when it came to high annual fee cards that offered many perks. That has changed, however:

  • A few years ago Citi put a lot of effort into the Prestige Card, which had a big sign-up bonus, generous rewards, and a great return on spend
  • Then just last year Chase introduced the Sapphire Reserve, which has resonated with millennials; it’s a premium card for people who largely wouldn’t have otherwise considered getting a premium card

While the Sapphire Reserve has a $450 annual fee, it offers triple points on dining and travel, a $300 annual travel credit, the ability to redeem points for 1.5 cents each towards travel purchases, and much more. On top of that, the card had a 100,000 point bonus when it was introduced (now the bonus is 50,000 points upon completing minimum spend).

This card has cost Chase a ton of money in the short term, to the point that they’re pushing for $200 million in cost cuts in the unit that oversees the card. The real telling thing is whether people renew after the first year. Now that more than a year is up since the card was introduced, Chase has reported that they’re pleased with the retention rate for the card.

With Chase introducing this card, both American Express and Citi have modified their premium products. Arguably the changes to the cards haven’t necessarily been positive, though changes have been made:

  • On the Platinum Card, Amex raised the annual fee by $100, though also introduced a $200 annual Uber credit, which for many more than offsets it
  • On the Prestige Card, Citi no longer offers Admirals Club access with the card, they devalued the fourth night free benefit, they don’t offer three rounds of free golf anymore, and more

While Chase is obviously trying with the Sapphire Reserve, and while I still think the Amex Platinum Card is great, I can’t help but wonder what Citi is thinking with the Prestige Card, as they made it less competitive. Well, it looks like we now have our answer. Reuters has a story about how the Sapphire Reserve has “squeezed” competitors. The following quote is especially telling:

A Citigroup executive said that after JPMorgan’s move Citi changed course and turned its marketing toward no-fee cards that offer free borrowing for as long 21 months instead of travel rewards.

“We shifted our focus away from rewards because of the competitive heat,” Citigroup Chief Financial Officer John Gerspach said in a conference call with reporters after posting quarterly results.

While Citi isn’t discontinuing the Prestige Card, they are shifting their focus away from rewards cards and instead focusing on no-fee cards that have intro 0% financing and don’t offer travel rewards.

Clearly Chase introduced something that has resonated with consumers, and I guess they’re squeezing the competition. It’s sad that Citi can’t — or chooses not to — compete in the premium card space. Personally I’m keeping the Prestige Card as I still value the fourth night free benefit, but I can’t help but be sad that they aren’t trying a bit harder.

Are you surprised to see Citi focusing their efforts away from travel rewards cards?

(Tip of the hat to View from the Wing)

  1. Sure, I’d love to see Citi with some better offerings, but it’s a bit off to criticize them when many of us still find the Prestige worth having. It’s not the flashiest product at the moment, but they’re still competing by offering it.

  2. Cancelling my Citi Hilton Reserve card next week, already got the Amex Surpass to replace. My last Citi card is the AA Executive card which I have for admirals club access and EQMs if I need them. Citi really has nothing else to offer me.

  3. You also have to keep in mind they are suffering a bit of winner’s curse from stealing costco from Amex, and losing money because of that aggressive bid. They are probably looking at their portfolio of cards and realizing none of them are making money.

  4. I’m product-changing my Citi Prestige at the end of this membership year, no question. The product is not even remotely competitive (for my personal situation at least) any more, I find the TYPs less attractive in terms of partners, and the card – even with the metal replacement they recently sent me – feels cheap to me for the amount of cash they want. Also to send me a letter to tell me they’re reducing the card’s Annual Fee and then to follow up a week later to say “Oh sorry, not you actually…. oh, and here’s some more devaluations of the few remaining benefits of your card.” is not appropriate behavior for a card they’re charging that much a year for the privilege of owning. And the website/mobile app sucks balls. Sorry Citi, but fuck that.

  5. I believe that citi really messed up by not paying to be the sole AA credit card provider. Now they split the money with Barclays. Had they kept all of AA’s business they would still offer AAdmirals club with the prestige card and would be able to add an additional credit card with zero AF. Then they overpaid for costco and lost out on the Hilton deal. They’ve been making some huge blunders lately.

  6. Honestly this seems like a business decision. We have all wondered how Chase plans to make a profit off their card and I still think those concerns are justified. At the end of the day’s these corporations need to make profits off their cards. If they tried and made their card even more competitive I think they would just lose money. As for the retention rate for the Chase card many people I know are planning on cancelling after the second year to give time to redeem the points. I get it I am not speaking for all customers but Chase used the mathematical term “pleased” to describe the rate.

  7. Honestly, I personally have more trouble justifying the Chase Sapphire Reserve than I do the Citi Prestige even with all its devalued benefits. I understand your point that Citi has devalued its card in the premium market and hasn’t done anything to remain competitive in that space but I don’t completely understand why the Chase Sapphire Reserve is a superior product by far. Comparing the primary Reserve and Prestige benefits, to me they don’t seem to be too far off from each other and I would argue that it is far easier to get more value out of the Citi Prestige. Chase is superior and more valuable in its travel credit, spending bonus categories, and ultimate rewards points but to me the difference isn’t drastic. When I have an annual fee credit card, I am interested in making sure that I get more value out of my card than the annual fee I pay and I think the Prestige with its 4th night free benefit allows me the possibility of that more than the Reserve. Depending on the accommodations you book with the 4th night free benefit, most people that utilize the benefit will be able to offset the annual fee difference by the second or even first booking. Other than spending a certain $ amount every year (depending on how much you value ultimate reward points) with the Reserve, there is no other way to be sure that you get more value out of the Reserve than its annual fee.

  8. Now that I think of it, almost none of citi’s cards are in my wallet or on my radar besides the citi double cash back card and maybe the Prestige sometime in the future when I have longer hotel stays (rather than lots of short stays, as I do now). Thank You points don’t have the flexibility of MR and UR points, so I’d rather pay the annual fee on something else.

  9. The CSR would never have existed if it wasn’t for the Prestige. It raised the bar and CSR went beyond. Prestige couldn’t keep up, they saw they were losing money sooner.
    Unfortunately, with less competition we will see CSR back down the benefits.

  10. I’m a Citi Priority customer so my AF on the Citi Prestige is reduced to $350. At that AF and the fact that you get the same purchase protections as Chase and Amex, as well as better flight delay protection (3 hours ) CSR and Amex plat is 6 hours. I’ve used that benefit twice after a 3-4 hour flight delay. One hotel stay of 4 nights justifies the AF. The transfer partners are pretty decent as Air France and Virgin Atlantic are solid transfer partners that allow me to book Delta flights. The AF being only $350 for me is why l keep it

  11. Citibank defined the opportunity cost of every travel rewards credit card in the market with the Citibank Double Cash card and the Costco card is no slouch relative to its rewards either. We use both.

  12. The Citi Prestige card saves me a ton of cash every year on hotel stays, thats the main reason I will keep the card.

  13. Citi Prestige saves me roughly $8k a year with it’s unique 4th night free benefit Plus has the best insurance benefits. Sapphire maybe gets me a few extra points and an extra $50 travel Credit.

  14. Citi dropped the ball several times and whoever runs the Credit Card unit must be feeling a lot of pressure about the job being on the line.

    They flopped with Costco by overpaying and agreeing to allow all Visa cards which is a boon for competitors as you don’t have to have a Citi card to make a purchase at Costco.

    They mistimed the Prestige cut around the time when Chase announced the new Reserve card. I will wager the pool of customers pleased with keeping the 4th night benefit is smaller than those who valued the card for the other benefits that were cut.

    They also flopped with getting exclusivity with AA – their biggest competitors have exclusivity with multiple programs (i.e. Chase with Southwest, United and Marriott and AMEX with Delta and Hilton) and couldn’t afford to salvage the Hilton relationship.

    Also I would add continuing expansion of Centurion lounges as an enhancement to the Platinum card that supports the AF increase along with Uber credits.

    I will be cancelling the Prestige in a week or two and falling back on my CSP while I assess my choices.

    Good job, Citi. Losing a Prestige customer of 4 years. They got rid of the companion ticket and flight miles but made up for it with the new benefits and now gutted almost everything. Disappointing.

  15. Had to go through executive review to see about approval for citi credit card product approval anybody out there know about how that works?.Like to hear . Thanks

  16. So far I am happy with the combo of CSR and Prestige. Benefits somewhat complementary. Keeping the CSR is an easy decision given the benefits. Overall as long as the travel credit and 4th night free stays I will keep the Prestige. But as stated before if the 4th night free goes so will the card.

  17. I agree that the Citi Prestige lags behind the other premium offerings, but the 4th night free benefit still gives me positive expected value. I think the Prestige card is particularly good for families that go to resorts or weeklong vacations every year. The 2 bedroom villa at Disney’s Aulani, for example, is about $1,300 per night, and I fully intend on using my Prestige to get that 4th night free next summer.

  18. Citi really needs eqds on the AA card. Otherwise my executive card is just a discounted Admirals club for my sister and I. It would sure come in handy for upgrade priority, I could care less about the eqms

  19. Thank you for an awesome blog. You reports are awesome, and you have assembled a great team. Yours is the one blog we read literally every time.
    Unfortunately, and i have had Citi cards for over 30 years, Citi is unable to compete with AMEX or Chase on service, professionalism, transfer partners.
    Their website is not user friendly (have you ever been able to figure out which transactions qualified for bonus points?)
    The AA cards are a joke. While the Barclay Aviator cards regularly run generous promotions, none whatsoever for the Citicards, which only have bonus miles on AA purchases, and AA miles are worthless.
    They might have been forced to “dumb down’ their portfolio. Welcome to the highly competitive world of cashback and no fee cards.

  20. @Andy , all your comment can be put in one sentence: you value the 4th night free a lot.

    CSR has much better benefit for almost everything else.
    1) The ability to combine all other chase points , especially chase freedom and freedom unlimited. while CITI double cash can only redeem for cash. Freedom 5% usually cover some big category and chase ink cover utility including phone and internet. Remember those are all no fee cards
    2) 3% dinning. Dinning is probably one of the most used category for most people.
    3) More and better transfer partners. For me the additions of UA and Hyatt make the chase points so much more valuable than CITI thanks points

  21. My issue with the Citi Prestige actually isn’t the product – it’s reasonably competitive, though I would agree it is less competitive than Amex Plat and CSR. My biggest gripe with them is their ridiculous customer service. I’ve had bad luck with travel this year – delayed multiple times > 3 hours, lost items by the airline and trying to return damaged products at day 80+. Each time, I provide everything they will need almost immediately.

    It then takes almost an act of God to get Citi to pay/compensate. Issues this year have included arguing with them about their own (clearly stated) T&C’s, having to chase them for resolution as they simply don’t do it otherwise, an online status that is regularly wrong, them asking me for more documentation on things they’ve settled in my favor (one current item they ask me for documents on every month is something they settled 6 months back!)… and so on

  22. If you fly AA (like most in AA cities i.e.: MIA):
    Citi Executive for 10K EQMs on spend
    Barclays Aviator Silver for 3K or more EQDs on spend…….
    they have us roped in

  23. @Lu

    I actually don’t value the 4th night free that much. My travel patterns don’t allow me to take advantage as much as I would personally like to because I generally don’t stay in one place for more than 2-3 days. I ended up canceling the Prestige this year but I made sure I got more value of out it than the annual fee I pay.

    My argument is just that it is much easier to get value out of the Citi Prestige with the 4th night free benefit than it is to get value out of the Chase Sapphire Reserve through normal spending.

    I have even had a instance this year staying at a Hyatt in San Diego where I technically only had a 3 night stay but still utilized the 4th night free benefit. It worked out because somehow the avg rate for the 3 night stay was around $140 but the avg rate for the 4 night stay was $110. I ended up leaving the 3rd night and checked out of the hotel on my phone although I’m sure I didn’t even need to do that but did it just to be safe. So not only was I able to get a cheaper rate on my 3 night stay, I even earned a little more points this way.

  24. @Andy sez: “I actually don’t value the 4th night free that much”, and yet the only argument he offers to support his claim that the utterly gutted Citi Prestige card is more valuable than the CSR is the Citi Prestige’s 4th night free benefit! Gotta do better than that…

  25. @DCS
    So explain to me what benefit does the CSR have besides its spending bonuses and ultimate reward points that is superior to the Prestige exactly?

  26. CITI had horrible customer service on the PRESTIGE sometimes. I had two horrendous experiences with them and cancelled my card as soon as I got my last miles out of there and before the new year. downgraded to a no fee card that I haven’t used once just to keep my “account” still open as to not affect my credit score.

  27. Everyone realizes that CITI’s new 4th night free program requires you to give up any elite status benefits with the hotel and you won’t earn any loyalty points when booking starting in September?

    Unless you use the 4th night free this $500 card is worthless. Since I usually use VRBO for more than a couple of nights it has nothing for me any more so I am out.

Leave a Reply

If you'd like to participate in the discussion, please adhere to our commenting guidelines. Your email address will not be published. Required fields are marked *