How Can Citi Eliminate Nearly All Travel and Purchase Benefits From All Their Cards?

Yesterday Citibank announced the elimination of nearly all of the ancillary benefits associated with their credit cards.

Gone effective September 22 are rental car insurance; trip cancellation and interruption; travel accident insurance; trip delay; baggage delay; lost baggage; price rewind; 90 day return protection; Medical Evacuation coverage; Missed Ticket Protection; roadside assistance dispatch service and travel and emergency assistance.

Reader Daniel asks, how can Citi even do this?

I had a question about the reduction (near elimination) of benefits in Citi products – Doesn’t Visa/MC require a certain amount of benefits for certain level of cards. In other words, in order for Citi to issue “World Elite Mastercards” (and to get the higher swipe fees that come with those cards) don’t they have to offer A, B, and C benefits?

I guess the answer is “no” since they’re clearing doing all this stuff, but I always thought that was the “cost” issuers had to make to issue “elite” card

There’s a general slate of benefits that comes with each level of product, however a card issuer can customize. Citi has offered its own version of several of the benefits for some time.

Think about the Ritz-Carlton card issued as a Visa Infinite, comes with the $100 companion airfare which is a Visa Infinite benefit but Sapphire Reserve is a Visa infinite without that benefit.

This is a whole new level, what Citi is doing of course. They’re betting that people barely even notice these benefits exist.

For a few years Mastercard has been working on an a la carte model, though their original idea was that the consumer would pick which benefits were important to them.

Right now most premium cards offer a variety of benefits that they barely promote to cardmembers (they’ve offered them largely because competitors offered them). They’re only sustainable to the extent they aren’t used much. That’s why we started to see issuers pulling back on price protection: with automation, lots of cardholders were submitting lots of claims since the prices of items they purchased could be tracked for them. Claims were even becoming common for price drops in the pennies. That made the benefit too costly.

A benefit that only works to the extent customers don’t use (or perhaps even know about it) isn’t sustainable. It also isn’t valuable to cardmembers.

The better model is fewer benefits that are directly relevant to customers and that an issuer helps customers to actually use. That’s what I wrote will be the future of credit card rewards.

Targeting benefits. Cards, especially in conjunction with travel data, are in a position to know and understand a tremendous amount. Experiences are offered by many programs, including banks and payment networks (“Mastercard Priceless Experiences”). Very few cardmembers know, investigate, or take advantage of them.

And if experiences are marketed they’re rarely relevant to the cardmember based on schedule or interest. I’ve never paid for a round of golf or purchased golf supplies on my credit card, so why would a program send me information on a golf experience, my status as a mid-40s white guy notwithstanding?

Instead if they know I spend a good deal on nice meals, that I’m traveling to a specific city, and they have a chef experience in the city while I’m there why not prompt me with the opportunity to participate? The point is to deliver the right message, to the right customer, at the right time.

  • Help customers use their benefits. Right now cards offer myriad travel and purchase protections, and those survive precisely because they’re rarely used. Price protection has become more rare as apps have developed to automate claims, even from tiny price drops. As benefits become costlier to provide they become untenable.

    Card companies need to flip the model from one where they hope customers don’t use the benefits to one where they help consumers use their benefits. That will mean fewer, more targeted benefits relevant to the customer.

    A company that emailed a cardmember after a long flight delay letting them know they have trip delay coverage and to send them the bill for hotel and meals, that emailed a customer when their co-brand airline partner loses their bags to let them know they can spend $100 a day on incidentals, wins the loyalty of customers in a deep, passionate way. Today most customers who have these benefits don’t know it, and those that know it don’t think about it, and that’s a lost opportunity to add real meaning to the customer experience when the cardmember cares about it most.

  • Citi isn’t doing this of course. They aren’t narrowing to the best benefits or the ones most relevant to customers. They aren’t targeting specific benefits to specific customers, and then helping their cardmembers actually use the benefits. They’re just taking a blunt axe to the benefits across the board, on the bet that these benefits don’t drive card acquisition or consumer spend.

    Will Citi be able to provide less value to consumers without taking a hit to spend volume or card revolve? If they are that’s dangerous because other banks will surely follow.

    The better path, I think, is to use these benefits strategically, to use the investment for maximum effect. Imagine the loyalty a card would garner if they let you know right away when a flight delay made a customer eligible for trip delay coverage and told them “hey just get a hotel room and a meal, charge those to your card and we’ll issue a statement credit.” That card would instantly become – and stay – top of wallet. And by shaving off some of the less relevant benefits this could be done without materially driving up costs, once the IT investment is successful.

    About Gary Leff

    Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

    More articles by Gary Leff »

    Comments

    1. Citi most likley did its homework and found the vast majority of its card holders didnt care or use those benefits, so why should Citi pay for them

      sort like when a hoitel, car rental or airline makes changes, if a person never relied of them for what is being changed they will contiune to use them, its only those who benefited that will yell out and have a tandum like a child.

      Its very simple if a person doesnt like what is offered simply Move On. When a restaurant changes its menu that isnt to my liking or fires the chef that I like I move on

      As for Citi I have only the TY CC and will continue to use it but not for those items where they are killing off the benefits I want

    2. The reason most people don’t use these benefits is they don’t know the fine print at the moment they need them and fear getting screwed by banks that won’t honor them because the customer missed something in the 42 pages of Terms and Conditions. Not surprised that most people don’t use them.

      I will not keep my Citi cards after this latest fiasco because I DO use these benefits and have found them to be very helpful. Without them, their are plenty of better options for card issuers. Your next article should be ” How Do I Use Up (or Retain) My Thank You Points” since I think Citi will see more cancellations than they are betting on. Citi puts a time limit on using your Thank You points after cancellation. (horribly complicated)

      Also, I reached out to Citi to see about reclaiming my annual fees and was told they will prorate annual fees cards cancelled by 01/01/20.

    3. More importantly, I think Citi will find itself in a legal bind, if enough consumers complain. Specifically, Citi is barred from changing the terms of use for those who have opened their accounts since Sept 22 2018. I would think those folks would get a full year before the terms can change. Otherwise, Citi will have to answer to regulators.

    4. I have two Citi cards: Costco, which is keeping most of these benefits, and the AAdvantage World Elite Mastercard, which is losing these benefits.

      I can’t imagine using a card to purchase airline tickets that doesn’t come with the baggage benefit. And would you ever use a card to rent a car without the loss damage waiver benefit? But, that said, I value the AAdvantage card pretty much only for the Admirals Club. I don’t think putting spend on the card is valuable.

      Bottom line, I’ll continue to evaluate whether I will keep these cards.

    5. I’m in the “won’t notice” camp. For quite awhile, I’ve thought the smorgasboard of benefits that this and every other premium card offered was a bit unusual, and assumed that most people were like myself and didn’t use them.

      Gary is 100% dead on with his thoughts on this topic. If a bank wants a sustained “relationship” with me, where their card is top-of-wallet, they have to deliver value to me. How do they do that? By offering me benefits that are easy to use and don’t require reading pages of fine print when I need it most.

      The jam the banks are in, as Gary notes, is that utilizing the benefits *costs money*. And I hate that. For as much as I churn rewards cards, I also would really like something where both parties think the arrangement is mutually beneficial. Don’t offer me a benefit you don’t want me to use. It’s that simple.

    6. “They’re betting that people barely even notice these benefits exist.”

      Right now that seems to be the most logical explanation out there

    7. With the change in 4th night free parameters and bump up to $500 fee, I was reconsidering continuing after September. All of the things being eliminated are a significant part of why I was considering keeping the Prestige. Definitely not a premium card anymore! The price rewind feature is a HUGE selling point for me. It saves me time and energy as a mom – and ultimately money. I bet no one is looking at my demographic: Busy moms that shop AND travel…

    8. Just purchase travel insurance now. Actually, third party travel insurance will probably provide you with much more benefits/higher limits than through the credit cards.

    9. I have the Citi thank you card. And they always wave the annual fee with very little spend. Guess it’s good for gas purchases in certain situations or Costco Gas here in Canada. But I will never again use that card for anything travel related. Hotels/ airfare.

    10. I guess I will also be one of those who will hardly notice. Since I get the baggage allowance by flying first class and always buy travel insurance (because most of my trips are long distance), which supersedes many of these perks, it probably won’t matter much.

      However, it will make some of the offers for new cards that come forth from now on much more likely to get my attention.

    11. I actually think you’re underestimating a sizable “middle ground” of card holders who use Citi cards primarily because they are aware of the benefits, but rarely or almost never use them.

      We switched from Amex to putting the bulk of our spending on our Citi Double Cash Back for two reasons- 1) the simplicity of the reward structure for everyday spending, and 2) knowing that if a purchase went “bad”, we were eventually covered. I don’t think we’ve ever filed (despite a lot of spending) on anything, but it was for piece of mind. This cost Citibank nothing while retaining our loyalty.

      I get Citibank thinks there are a lot of people who have learned to game the system, and there are probably a majority who aren’t aware of the benefits (which again should cost them little). However, I think there is a sizable minority like me who are going to migrate elsewhere. If Citibank assumed that only people aware are the only people who often use the coverage, that’s going to be a problem for them.

    12. I am in the “I WILL notice” camp. 2x over the past year my luggage has been lost or delayed, and I have been able to collect with my CSR. So of course I am going to stick with that card and forego the Citi.

      I would think road warriors are going to take notice of these changes, especially when it comes to rental car insurance. But there are some ignorant frequent travelers who know nothing about the benefits their cards provide–I have a relative who has an Amex Platinum, and she was not aware she had airport lounge access. Can you imagine?

    13. If their assumption is that people don’t know about or use these benefits and their assumption is that the worst outcome would be a loss of some cardholders. However if that is the case, Citi is even less competent than I already knew they were, it’s an incredibly grave miscalculation because the users that utilize those benefits (myself included) are extremely loyal to those cards – they will only be driving away their most loyal users.

      I have several Citi cards including TY, Platinum and world elite (I initially got both the platinum and world elite for the signup miles bonus) but with the ~$500/year fee, I’ve utilized more and more of the soon to be cancelled benefits over the years. I justify the expense by using the free baggage (already been cut down), same day fee-less change, access to the admirals club (primarily for access to the AA agents whom are more capable of helping change travel plans in case if cancellations, etc.), the annual credit for Pre-check or global entry fees and -because I live in nyc and rent a lot of cars- the collision coverage (because of which I purchased a non-owners car insurance liability policy!). Without those benefits I have no reason to keep the card with its $500 annual fee. However the real problem Citi will have on their hands is that cancelling my card(s) will very likely damage my credit score (as the average time of credit ownership will negatively effect my score, twice as much if I replace it with a newer card that includes those benefits.

      It would amount to forcing me to pay a bank annually for the sole purpose of not having my credit score damaged.

      The intentional loss of those benefits that I use (which initially made me, and has since kept me, an extremely loyal young customer) paired with any change to my credit score will guarantee I never conduct business with Citibank ever again.

    14. Citibank is making grave mistakes and will hand over all whats left of their best customers to Chase
      First issue the 4th night free 2x a year will be available to book through prepaid non authorized booking channels negating stay credit and points/miles and likely in house benefits
      The program has had limited Domestic point partner opportunities
      other than International/overseas carriers.It takes a global traveler to sustain this relationship
      I consider the card toast now
      Citibank historically has followed this pattern offering a good card product and them beating it to death with massive devaluations
      From the Admirals Club on down this card has been gutted and devastated
      I can personally say to Citi American Express and Chase appreciate their massave stupidity

    15. I don’t use Citi cards but the recent downgrade and elimination of benefits on the Barclay AA Silver Aviator card lead me to believe that the benefits (10% mileage redemption on award flights, EQD awards for meeting spend levels) were being used widely and costing too much, not the opposite, that they weren’t being utilized so they did us all a favor by eliminating or severely reducing them and throwing out a bone like $50 per year free WiFi that “everyone” wants.

      I wouldn’t mind a spend threshold to select among one or two good benefits that I actually can use – a tailored approach, like you suggest.

    16. Well, actually I notice.
      I have an AMEX Platinum card that just gets worse and worse, particularly the customer service.
      I have it and other cards as a backup for on-the-road disasters/miseries. IF companies are not going to provide the backup — they say that folks don’t use the benefits — then why have the damn card?
      It is like insurance, I have it IN CASE I need it. My feeling (and my experience) tells me that American mega-corporations are now largely in the business of tricking customers. I end up trying to protect myself as much as possible.
      But, no protection, no card.
      I am fed up with the airlines. Now I get to be fed up with credit cards.
      Its a Wonderful Life.

    17. +1 to Donna. My no-fee MileUp card stays in the sock drawer so this won’t matter to me. However if Chase and Amex follow suit then it will be a big deal and I will start cutting up high fee cards.

    18. @dwondermeant

      >>>Citibank historically has followed this pattern offering a good card product and them beating it to death with massive devaluations<<<

      Of course. Citi has long been laughed at for being the card company that creates new products that are money losers, and then has to scale them back, and then finally cancels them.

      For the 0 AF cards, maybe this cutback will work. Maybe those are only used for things like filling the tank with gas. However, for the premium cards, I cannot imagine that Citi will not get blow back.

      As much as I laugh at Citi's card lineup, I do not think they are hiring idiots to design their card features. Someone at Citi has run the numbers and determined that the customers this will drive away were money losing customers.

    19. I buy insurance hoping I will not need to use it. That is the way I look at my card benefits. One if the reasons I have my Citi Prestige card is because it offers insurance benefits I hope I will not need. However on the occasions I have needed to claim, I have said a silent prayer of thanks to Citi. Oh well, I guess I will just move on to another card issuer. If Citi looked at my record and thought, He doesn’t use the benefits much so they don’t mean much to him, they made a big mistake! I suspect there are many others like me as well.

    20. @Brian You said, “I have two Citi cards: Costco, which is keeping most of these benefits, and the AAdvantage World Elite Mastercard, which is losing these benefits.” Are you certain the Citi Cosco card are keeping the travel benefits? If so, it is both the personal and biz versions? The info online on this seems ambiguous at best. Thanks.

    21. I’m convinced this is driven not by the CCs but by the 3rd party insurance firms. They’re locked into horrible contracts for these products that were based on low utilization that is now much higher.

    22. I am appalled that Citi did this with basically no notice. I booked a trip to Egypt and Morocco in March-May 2020 relying on my Prestige card for trip insurance several months ago. Had I known this was happening, I would have booked with my Platinum and bought trip insurance. I am NOT a happy camper and will be getting rid of this card.

    23. Here’s a fun question: how is AA going to react if Citi loses a noticeable number of their co-branded cardholders over this? I buy into Gary’s analysis that AA depends on selling miles to the card-issuing banks to stay profitable. If they lose, say, 10% of co-branded cardholders over this, it seems like that would have a noticeable impact on AA’s profits.

    24. Like a warranty on my car I
      may never use, I still want to know it’s there, that I have options. Using Citi cards without protections is unnecessary since Chase & AMEX do them so well! PASS on any future Citi apps.

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