Citi cards - major changes

[albyd]

Thanks for sharing your experience Moindardt.
Sounds like Citi are digging in with the annual fee much like ANZ have. At least Diners (Citi Australia) have cut their annual fee. Assuming everyone else will hold firm.
Only ever had my Prestige for points earn. I've done well out of it. Additional 'perks' were a nice to have. I'm waiting for everyone else to announce their changes before I decide what my next move is. That won't be including $700 annual fee for 0.5ppd general spend (most of the bonus category spend already goes on my Amex).

 

[Nutcase]

I also pointed out my spend for the year (amazed that I needed to) which thanks to a few projects where my suppliers took visa with no surcharge (very happy with that), was approx $1m in the last anniversary year and $500k in the previous year. Her response was "We don't buy customers, so either cancel the card or don't, it's your decision"! That was when I hit send on 2.2m rewards points to Krisflyer.

So I transferred the entire balance outstanding on the account, with the points to be finalised on Thursday before they close it and Citibank can stick it up the cough!!! :evil::evil::evil:

In the end, I think I got a lot more than $1400 (2 yrs @ $700) extra over any other card, but there was better cards now, so perfect time to move on.

You were not a profitable customer for Citibank which is why they wouldn't negotiate fees.

Given that your spend was mainly commercial and was conducted on a personal card plus you earned 2.2MM points means that Citibank would probably be best served by you moving on.

The challenge that you will now have will be to be able to get a card with a credit limit to replace this one.

Don't expect a call centre operator to make a $700 decision. They don't have the authority and they don't care. Use Linkedin and hit up the head of cards for citibank (He's on there and is able to be connected with quite easily) and send him a message directly. If you have spent as much as you say and redeemed 2.2MM points then he would want to talk to you.

 

[Moindardt]

You were not a profitable customer for Citibank which is why they wouldn't negotiate fees.

Given that your spend was mainly commercial and was conducted on a personal card plus you earned 2.2MM points means that Citibank would probably be best served by you moving on.

The challenge that you will now have will be to be able to get a card with a credit limit to replace this one.

Don't expect a call centre operator to make a $700 decision. They don't have the authority and they don't care. Use Linkedin and hit up the head of cards for citibank (He's on there and is able to be connected with quite easily) and send him a message directly. If you have spent as much as you say and redeemed 2.2MM points then he would want to talk to you.

Wow. You really didn't like my comment on economists and taken it very much to heart. If I have offended you personally, I am sorry, but stop doing everything you can to prove my points :shock::shock:

And to answer your points. Wrong, Wrong, Wrong and Wrong. Very typical economist to take tiny bits of data and make wildly exaggerated claims. Seriously dude. Commenting on credit limits with zero data to back it up. Wow!

Topped off your "If you have spent as much as you say and redeemed 2.2MM points then he would want to talk to you." insinuating I am lying. If it really is required to restore your faith in humanity than I can post it but it is as a data point for others to process not because I want to change some random persons perspective on me. I know of people on here to 10x more cards spending more on each of them. There is a reason we share facts on here because everything is situational.

I have no interest in contacting the head of cards or anything like that as I had no intention of keeping the card anyway, I just had some flights that I might have been able to use the benefits for next month so wanted the cut off date. As it turned out, like so many of the "benefits" they were useless anyway. FYI Meet and Greet at ICN, they will walk beside you to customs to keep you company??? *seriously*

If I had have gotten it free, then I would have kept it until June 15 and cancelled. As it is, I have cancelled it and will now just have to use my CBA Diamond Mastercard with far bigger credit limit (but coughpier earn) until I work out what to replace it with.

 

[Nutcase]

Wow. You really didn't like my comment on economists and taken it very much to heart. If I have offended you personally, I am sorry, but stop doing everything you can to prove my points :shock::shock:

And to answer your points. Wrong, Wrong, Wrong and Wrong. Very typical economist to take tiny bits of data and make wildly exaggerated claims. Seriously dude. Commenting on credit limits with zero data to back it up. Wow!

Topped off your "If you have spent as much as you say and redeemed 2.2MM points then he would want to talk to you." insinuating I am lying. If it really is required to restore your faith in humanity than I can post it but it is as a data point for others to process not because I want to change some random persons perspective on me. I know of people on here to 10x more cards spending more on each of them. There is a reason we share facts on here because everything is situational.

I have no interest in contacting the head of cards or anything like that as I had no intention of keeping the card anyway, I just had some flights that I might have been able to use the benefits for next month so wanted the cut off date. As it turned out, like so many of the "benefits" they were useless anyway. FYI Meet and Greet at ICN, they will walk beside you to customs to keep you company??? *seriously*

If I had have gotten it free, then I would have kept it until June 15 and cancelled. As it is, I have cancelled it and will now just have to use my CBA Diamond Mastercard with far bigger credit limit (but coughpier earn) until I work out what to replace it with.

The economics of the cards business is challenging for people outside of the industry. Premium cards have premium costs for a bank. Its like any kind of product.

In your case, you don't seemed to have revolved a balance nor did you indicate that you paid any ancillary fees. Therefore, with a high commercial spend and a high limit it is safe to assume that Citibank made a loss. Points cost them money and in your instance your commercial spend didn't help. Demanding an annual fee reduction or waiver (which was their only revenue stream besides interchange) for a product that is costing them a lot of money to maintain doesn't make sense for them. Even an unused limit costs the Bank money.

None of this is any kind of witchcraft or trickery. The cost to keep you outweighed the benefits to the Bank so they let you go.

As for jumping ship to CBA. They are due to announce their award changes shortly along with NAB and WBC with AMEX being dumped and further reductions in points earning.

Hope this explains

 

[BacchusMarsh]

Don't expect a call centre operator to make a $700 decision. They don't have the authority and they don't care.

The cost to keep you outweighed the benefits to the Bank so they let you go. They broke up with you.

Um, OK, Nutcase.

 

[Nutcase]

Um, OK, Nutcase.

Sure. Any time.

Your point?

 

[Moindardt]

The economics of the cards business is challenging for people outside of the industry. Premium cards have premium costs for a bank. Its like any kind of product.

In your case, you don't seemed to have revolved a balance nor did you indicate that you paid any ancillary fees. Therefore, with a high commercial spend and a high limit it is safe to assume that Citibank made a loss. Points cost them money and in your instance your commercial spend didn't help. Demanding an annual fee reduction or waiver (which was their only revenue stream besides interchange) for a product that is costing them a lot of money to maintain doesn't make sense for them. Even an unused limit costs the Bank money.

None of this is any kind of witchcraft or trickery. The cost to keep you outweighed the benefits to the Bank so they let you go.

As for jumping ship to CBA. They are due to announce their award changes shortly along with NAB and WBC with AMEX being dumped and further reductions in points earning.

Hope this explains

Yes, they didn't make money out of the interested and penalties but they made a lot more from transaction fees.

Product Krisfler mile costs .7 cents and sells for between 1c (commercial) and 2c (retail). Profit => .3 cents per mile. More Miles = more $$$
Product Annual Fee Costs $350 Sells for $700. Profit $350

Breakeven = $350/.003 = 116666 miles

Given the profitability of the Banks rewards programs and the airlines rewards programs, these could be taken as conservative.

None of this is any kind of witchcraft or trickery. There is a reason why Economists only work for governments or banks but everyone has a book-keeper or accountant. Not everyone can afford an overhead of massages, astrology and economic predictions

 

[Nutcase]

Yes, they didn't make money out of the interested and penalties but they made a lot more from transaction fees.

Product Krisfler mile costs .7 cents and sells for between 1c (commercial) and 2c (retail). Profit => .3 cents per mile. More Miles = more $$$
Product Annual Fee Costs $350 Sells for $700. Profit $350

Breakeven = $350/.003 = 116666 miles

Given the profitability of the Banks rewards programs and the airlines rewards programs, these could be taken as conservative.

None of this is any kind of witchcraft or trickery. There is a reason why Economists only work for governments or banks but everyone has a book-keeper or accountant. Not everyone can afford an overhead of massages, astrology and economic predictions

The issuing Bank earns interchange paid by the acquirer. This funds rewards.

If you spend $100 then the bank will earn $.50 (average) interchange of which $0.70 will be paid away for points for a $1 = 1 point exchange. This is how they make a loss and why rewards are being cut.

Under the example above - More miles means more of a loss.

You have also not factored in;

Fraud
Processing
Chargebacks
Benefits (travel insurance, Extended warranty etc)
Funding (Your limit has to be funded even when you aren't using all of it)

Citibank does not make money from the rewards program as they are paying for the points that they are giving to you. Rewards are a cost to the Bank. The airline is making money from the rewards.

 

[trippin_the_rift]

Product Krisfler mile costs .7 cents and sells for between 1c (commercial) and 2c (retail). Profit => .3 cents per mile. More Miles = more $$$
Product Annual Fee Costs $350 Sells for $700. Profit $350

None of this is any kind of witchcraft or trickery. There is a reason why Economists only work for governments or banks but everyone has a book-keeper or accountant. Not everyone can afford an overhead of massages, astrology and economic predictions

Krisflyer miles would cost the bank > $0.007 pm, especially with a premium cardholder base who are more likely to redeem on business/first class travel. This increases the cost of transport for Krisflyer and reduces the margin, thus less flexibility when selling to banks with high numbers of premium cardholders.

The issuing Bank earns interchange paid by the acquirer. This funds rewards.

If you spend $100 then the bank will earn $.50 (average) interchange of which $0.70 will be paid away for points for a $1 = 1 point exchange. This is how they make a loss and why rewards are being cut.

Appreciate the example but it's not so simple in the big scheme. The bank issues 'Citi points' to the customer, which represent deferred revenue since these issued points are yet to have any hard associated cost.
Some of these Citi points expire/breakage, some are redeemed for gift cards, used for annual fee reimbursements etc. The way cardholders use their points is highly important to the overall profitability of the card scheme. When applying loyalty behavioral psychology, we know that for an effective loyalty program there needs to be the ultra high-end customers who have high engagement but low profitability. These customers are fundamental proof the program has enough key drivers to keep the low-end customers engaged (I could talk about this all day and many studies have shown this to be true..)

In Moindardt's case - looking at their overall profitability purely from a card scheme is, quite frankly, downright dangerous and full of commercial risk. Here's why:-

- Does Moindardt hold any other Citi products? What do the commercials look like? (eg: does he have a mortgage with Citi? Citi Gold customer with investment funds?)
- What propensity does Moindardt have to take up new products? (Someone with 1M+ spend capacity also has other attributes Citi could exploit for profit)
- What BI does Citibank hold on Moindardt, and how does their information feed into the product team?
- How much did Moindardt spend on international transactions which attracted a 3.5% premium?
- What share of wallet is Citi capturing of Moindardt's total card spend? (perhaps 1M represents only 80%, and the remaining 20% is transacted through premium merchants)
- Where does Moindardt fit into the cardholder network map? (ie: who does he associate with on a daily basis that could have a positive impact to Citibank?)
- Clearly Moindardt values points. How much revenue is Citibank leaving on the table by not designing a better churn management system (eg: Amex style - pay the full annual fee, we'll give you X points bonus)
- At the time of the call, Moindardt was highly profitable for the bank. No points had been transferred from Citibank -> Krisflyer. Bank inflexibility (and failure to see a revenue opportunity as above), means these Citi points were instantly transferred and thus creating a negative revenue event for the bank.
- What is the overall (LTV) profitability of the customer, what is their propensity score to continue transacting with the bank?

It's inaccurate to say Citibank does not profit from the rewards program. I mean, if it was a true cost-center - why doesn't Citibank remove the rewards program entirely. Then we would see how important it really is in driving business value.

 

[Nutcase]

Krisflyer miles would cost the bank > $0.007 pm, especially with a premium cardholder base who are more likely to redeem on business/first class travel. This increases the cost of transport for Krisflyer and reduces the margin, thus less flexibility when selling to banks with high numbers of premium cardholders.



Appreciate the example but it's not so simple in the big scheme. The bank issues 'Citi points' to the customer, which represent deferred revenue since these issued points are yet to have any hard associated cost.
Some of these Citi points expire/breakage, some are redeemed for gift cards, used for annual fee reimbursements etc. The way cardholders use their points is highly important to the overall profitability of the card scheme. When applying loyalty behavioral psychology, we know that for an effective loyalty program there needs to be the ultra high-end customers who have high engagement but low profitability. These customers are fundamental proof the program has enough key drivers to keep the low-end customers engaged (I could talk about this all day and many studies have shown this to be true..)

In Moindardt's case - looking at their overall profitability purely from a card scheme is, quite frankly, downright dangerous and full of commercial risk. Here's why:-

- Does Moindardt hold any other Citi products? What do the commercials look like? (eg: does he have a mortgage with Citi? Citi Gold customer with investment funds?)
- What propensity does Moindardt have to take up new products? (Someone with 1M+ spend capacity also has other attributes Citi could exploit for profit)
- What BI does Citibank hold on Moindardt, and how does their information feed into the product team?
- How much did Moindardt spend on international transactions which attracted a 3.5% premium?
- What share of wallet is Citi capturing of Moindardt's total card spend? (perhaps 1M represents only 80%, and the remaining 20% is transacted through premium merchants)
- Where does Moindardt fit into the cardholder network map? (ie: who does he associate with on a daily basis that could have a positive impact to Citibank?)
- Clearly Moindardt values points. How much revenue is Citibank leaving on the table by not designing a better churn management system (eg: Amex style - pay the full annual fee, we'll give you X points bonus)
- At the time of the call, Moindardt was highly profitable for the bank. No points had been transferred from Citibank -> Krisflyer. Bank inflexibility (and failure to see a revenue opportunity as above), means these Citi points were instantly transferred and thus creating a negative revenue event for the bank.
- What is the overall (LTV) profitability of the customer, what is their propensity score to continue transacting with the bank?

It's inaccurate to say Citibank does not profit from the rewards program. I mean, if it was a true cost-center - why doesn't Citibank remove the rewards program entirely. Then we would see how important it really is in driving business value.

The theory of the broader customer relationship is great however the fly in the ointment is that each product must stand on its own.

In this instance, the customer was unprofitable. If he was profitable he would still have the card and more products and be a loyal Citibank customer and not have products with CBA.

The reason why Citibank keeps the rewards program is that it has to not because it wants to. It does not make money from it, its a cost of doing business.

 

[Isochronous]

The theory of the broader customer relationship is great however the fly in the ointment is that each product must stand on its own.

In this instance, the customer was unprofitable. If he was profitable he would still have the card and more products and be a loyal Citibank customer and not have products with CBA.

The reason why Citibank keeps the rewards program is that it has to not because it wants to. It does not make money from it, its a cost of doing business.

Clearly you haven't heard of the concept of the loss-leader or the break even product which is used to create the customer relationship, which then serves as a basis for everything else.

 

[Moindardt]

The theory of the broader customer relationship is great however the fly in the ointment is that each product must stand on its own.

In this instance, the customer was unprofitable. If he was profitable he would still have the card and more products and be a loyal Citibank customer and not have products with CBA.

The reason why Citibank keeps the rewards program is that it has to not because it wants to. It does not make money from it, its a cost of doing business.

You entire premise is based on the your assumption that it is not profitable for them. Have you even looked at the card and it's requirements? It is the card with the highest requirements by 50% of the second highest card. It is specifically designed for people who are putting large volumes through it. It specifically excludes all those likely to not be able to pay it off each month. At that level, if you can't pay it, you will most likely be bankrupt and they will get nothing anyway.

Therefore, the card is either designed as a loss-leader or a profitable transactional card and I find it very hard to believe their penultimate card was not designed to make money. Given the pretty sad attempt at trying to push anything, it certainly wasn't a loss leader.

But I think we all tire of this conversation, given you are the only one everyone is trying to talk to. Farewell Prestige! I knew you when you were worthwhile!

 

[kamchatsky]

I have been working on IT setup of Call Centres in the past for a big 4 bank. One thing I noticed is that they have certain rating on each customer displayed on the screen, as they ring up and provide details to the CSR. That rating is used by the bank to allow CSR to make any additional offers to retain their services.

My guess is Citibank has something similar for each individual customer and the rating is used to determine whether to try to retain the customer, or let them go.

 

[Nutcase]

Clearly you haven't heard of the concept of the loss-leader or the break even product which is used to create the customer relationship, which then serves as a basis for everything else.

Premium Credit cards are never loss leaders and are never used for relationship footings.

Footings are secured lending (mortgages) or deposits (cash) not unsecured high risk credit facilities with declining revenue streams and increasing costs that can be easily moved to other providers. Mortgages are stickier than credit card and banks make a lot more out of them.

 

[Nutcase]

You entire premise is based on the your assumption that it is not profitable for them. Have you even looked at the card and it's requirements? It is the card with the highest requirements by 50% of the second highest card. It is specifically designed for people who are putting large volumes through it. It specifically excludes all those likely to not be able to pay it off each month. At that level, if you can't pay it, you will most likely be bankrupt and they will get nothing anyway.

Therefore, the card is either designed as a loss-leader or a profitable transactional card and I find it very hard to believe their penultimate card was not designed to make money. Given the pretty sad attempt at trying to push anything, it certainly wasn't a loss leader.

But I think we all tire of this conversation, given you are the only one everyone is trying to talk to. Farewell Prestige! I knew you when you were worthwhile!

I am very familiar with the Citibank card fleet and this product in particular. It is part of a citibank global card strategy and the "prestige" brand off the back of the Visa ultimate card program. In this market however, the revenue buckets are regulated and are shrinking and as a results many customers will become unprofitable unless costs are reigned in or rewards cut. Is is indeed possible for customers to become unprofitable and either exited or not encouraged to stay which is what has happened in this case. As mentioned earlier, if a customer is valuable, the Bank will try and keep them otherwise the Bank is happy to see the back of them.

No premium card is designed as a loss leader. That makes no sense at all.

I tire of these conversations as well.

 

[Nutcase]

I have been working on IT setup of Call Centres in the past for a big 4 bank. One thing I noticed is that they have certain rating on each customer displayed on the screen, as they ring up and provide details to the CSR. That rating is used by the bank to allow CSR to make any additional offers to retain their services.

My guess is Citibank has something similar for each individual customer and the rating is used to determine whether to try to retain the customer, or let them go.

Thats exactly how it works

 

[Cynicor]

Moindart,

May I ask how many points you were offered to keep it, instead? I assume they made a bid?

I have just been charged the annual fee and so will be cancelling the card. I have one last purchase to make and then will close the account for an annual fee refund. They offered 15000 points, a measly token I feel.

 

[Moindardt]

A little update. I just received a call from one of the supervisors to say they had been told no-one is to get an annual fee waiver but they lodged a special request for me and just received a reply that no-one is to be exempted. I said I thought he was calling to finalise the closing of the account and he said they didn't think I was totally serious about it ie. I wouldn't follow through on my threat. I said of course I am, I was just waiting for the points to hit the account so I can transfer them out and I had already paid off the card.

I also made a point of Nutcase's comments that obviously I wasn't a profitable customer and must have had a low rating to not be offered the waiver. He replied quite the opposite, it was just the company was one of the first to announce the changes but didn't want to get "??" I can't remember the word he used (it made me think of butt-****ed ). They were trying to get ahead of all the problems with the changes to the interchange and it had come back to bite them which wasn't fair as all the other banks were going to have to do the same as well. He asked if I was 100% set on closing or could they try and come up with a solution that won't be as good as the full $700 but will at least be enough for me to stay with them. I said sure, lets see what you can do.

He ended up escalating it and they came back with $350 annual fee for life + 15000 points. Given I can use all the transfers and free hotel next month, (which will save about $400) and I get another 2 months at the higher earn, I think that is a decent result.

 

[psi999]

$350 annual fee for life is a great result. Congrats.

 

[RAM]

Theres nothing stopping you withdrawing $10,000 in cash. AUSTRAC is automated anyway for amounts of $10k plus. The teller would also ask you what the funds are for as part of their compliance obligations.

You could try and pay in cash at the council chambers however councils have outsourced receivables to Australia Post and Banks so they no longer have the ability to receipt the funds.

Im not quite sure what this would achieve except to inconvenience you enormously. The issue with points devaluation has nothing to do with the council that you are trying to punish.

Its a bit like drinking poison and expecting someone else to die.

The AusTrac system is all smoke and mirrors.

Since 1989 there have only been two prosecutions from it.

Just TWO!

Only done to fool the honest and left free for the dishonest to continue laundering their money. For example - real estate agents receiving a suitcase of cash do not need to report it nor does the bank when it is then deposited into the RE agent's trust account.

Want to know how many bribes are paid...