I receive compensation for many links on this blog. You don’t have to use these links, but I am grateful to you if you do. American Express, Citibank, Chase, Capital One and other banks are advertising partners of this site. Any opinions expressed in this post are my own, and have not been reviewed, approved, or endorsed by my advertising partners. I do not write about all credit cards that are available -- instead focusing on miles, points, and cash back (and currencies that can be converted into the same).
If you put a dollar of spending on a credit card, your opportunity cost is the two cents you’d earn with a 2% cash back card. If all you’re earning is one airline mile, you’re effectively buying that mile for two cents.
The simple way to see that is you can earn 1% when you make a purchase and 1% when you pay for the purchase with a no annual fee Citi Double Cash Card. You’re giving up cash when you put spend on a miles credit card. So you should be getting a higher rate of return in order to do that. 2 cents is more than most people are willing to spend for miles.
Earning on the Citi Double Cash Card is really strong for someone that isn’t going to redeem miles for premium cabin international travel as well. If you’re going to fly domestically, especially domestic economy, cash back is better than miles.
And though you can earn more travel credits as a rebate (e.g. an effective rebate of 2.05 cents per dollar on travel with the Barclaycard Arrival Plus™ World Elite MasterCard® and a strong sign up bonus too) I will take cash over a travel credit of similar amount for sure.
This level of rebate is expensive for a bank to offer. And every loyalty program and card issuer is obsessed with the problem of millennials. They’re future spenders, and consultants say they’re different. They want immediate gratification and experiences rather than things.
Millennials are low trust, so simple value propositions with immediate proof of value are a key strategy to employ. (Airline loyalty programs especially have a huge problem with millennials because of a history of devaluations and doubletalk.)
Enter Katy Perry, now advertising for Citibank. (HT: Alan H.)
The new spot features Perry rehearsing for an upcoming show and highlights the disparity between what people say and what they actually mean through everyday scenarios. Citi’s messaging—which will continue later this month with Perry’s micro teacup poodle named Nugget—is simple: they mean what we say.
“I’m all about not mincing my words, so I’m excited to be teaming up with Citi for this hilarious new campaign,” Perry said. “I’m super pleased Nugget finally gets to be on TV, too.”
The card offers a strong value proposition, it’s expensive for Citi to offer. But marketing is usually needed for consumers to become aware of even the best value propositions.