Citigroup takes on JPMorgan with new 5% card

Pam Habner, Citigroups Head of US Branded Cards

Source: Citigroup

Banks raid themselves to lure new credit card customers, dangle hefty 100,000-point rewards, and bring new products to market.

Citigroup is now making a foray into one of the fastest growing card segments.

The bank is launching a credit card on Thursday that will give users 5% cashback on up to $ 500 in monthly expenses in any category – from restaurants to groceries to travel – and 1% cashback on all other purchases , says Pam Habner. Citigroup boss for US branded cards.

Unlike existing competitive cards, including JPMorgan Chase, the new Custom Cash card does not require registration or category selection for this 5% rate. Instead, it automatically applies the rate to a user’s highest spending category.

“The problem with these cards is that they are complicated; You need to keep an eye on the rotating categories, which change every quarter, or you need to remember which category the issuer is listing as the category that you may get money back for, ”Habner said this week.

“So the customer has to adapt to the offer of the card instead of how it should be, ie the card simply adapts to the customer’s lifestyle.”

Habner has a unique view of the competitive landscape in cards. She joined Citigroup from JPMorgan last year, where she helped develop the bank’s Sapphire Reserve card. This product was so popular when it was launched in 2016 that the bank ran out of metal used to make the cards.

The Sapphire, which at the time had unprecedented levels of rewards, escalated the banks’ battle for high-spending customers. Credit card issuers like American Express, Capital One, and Discover have been forced to offer generous sign-up bonuses.

It has also helped spread a subculture of reward maximizers, people who get the maximum number of points possible from a rotating deck of cards and rely on Excel spreadsheets to keep track of things. Savvy card users forced JPMorgan to take several large balance sheet losses, an admission that customers were collecting points faster than the bank expected.

“Hype-up Rewards”

While banks withdrew their card promotions last year fearing the coronavirus pandemic would lead to a wave of defaults, they are now back with a vengeance. American credit card customers proved far more resilient than anyone would have guessed, aided by multiple rounds of government stimulus programs that poured trillions into the economy.

American Express and Capital One are now offering cards with 100,000 bonus points. JPMorgan recently increased the bonus for its Sapphire Preferred card to 100,000 points for the first time. This week Wells Fargo announced a 2% cashback card targeting Citigroup’s popular Double Cash card.

“We have seen a lot of acclaimed rewards and more marketing activity in the past few weeks,” said Ted Rossman, senior analyst at CreditCards.com. “It’s been a slow year, but then suddenly things start popping up again.

After joining Citigroup last July, Habner looked for ways to increase the bank’s market share. While it is a leader in the card industry, its credit book and list of active customers has shrunk during the pandemic. The bank hired an outside firm to ask millennials what an ideal card would be, she said.

They prioritized a no-fee cash-back card that was easy to use via a smartphone app, Habner said. Custom Cash users can track their spend through the bank’s mobile app, which shows which category is receiving the most rewards in a given month, Habner said. Like the competition, the product has a $ 200 signature bonus.

“We wanted to make it easy for customers to concentrate fully on enjoying their lives, especially in this time after the pandemic when they are returning to the things they enjoy doing,” said Habner.

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