Rapid Travel Chai

Citi unveiled the quasi-2% Double Cash Card which was greeted with uncritical boosterism from certain affiliate bloggers and plenty of invective from several others, Travel is Free and Saverocity Matt with the biggest howls. Both posts and their extensive comments are worth reading.

I do not have affiliate links with Citi and do not want to get into the endless debate about bloggers and affiliates. Plenty of other outlets for that.

I curious to examine if this card is actually good or not.

The card has no sign-up bonus so it is hard to argue for directly applying for it. Citi, however, is oddly flexible in allowing conversion from existing cards after an account is open for 12 months, even across co-brand cards. You can pretty much convert to any card, my favorite is the no annual fee Dividend which is a relatively easy $300 cash back per year, but you can even switch among AA, Hilton, Thank You and other cards, see my recent post for the current options. Doctor of Credit reports that Double Cash will become a conversion option from September 7, 2014. For those with unused Citi cards or annual fee cards coming due, this may be a good candidate for conversion to preserve the credit line.

The critique of the Double Cash Card is principally 3 points:

1. Only 1% cash back is directly awarded on purchases. The next 1% appears to only apply to the statement balance amount, so it is possible that 1% will not be award if balances are paid off before statement close. (“Cash Back on Purchases: Unless you are participating in a limited time promotional offer, you will earn 1% cash back based upon eligible purchases appearing on your current month’s billing statement. Eligible purchases you make will be accumulated in the “Purchase Tracker” shown on your billing statement. The Purchase Tracker shows the balance eligible to earn cash back on payments each billing cycle. Cash Back on Payments: You will also earn 1% cash back on payments you make that appear on your current month’s billing statement as long as the amount paid is at least the Minimum Payment Due that is printed on your billing statement and there is a balance in the Purchase Tracker. The balance in the Purchase Tracker is reduced by eligible payments you make. When the Purchase Tracker reaches $0, you won’t earn cash back on payments until more eligible purchases are made.”)
2. There is a time-value of money loss by the presumably extra statement it takes to award the second 1%.
3. The cashback awards do not have an automatic mechanism. Most similar cards do not either, but the Fidelity Amex does for $50 minimum (manual rewards possible for minimum $25). For the Citi card you need to manually request cashback at minimum $25 paid via check, statement credit or gift card. Another time-value of money thing critique.

The Travel is Free and Saverocity posts have determined this card may not be suitable for the manufactured spend audience who not only pay bills in full each month but, as a matter of course, do things including:

1. Purchase gift cards at category bonuses to use for everyday spend.
2. Push so much money through cards that it is often necessary to pay off balances mid-cycle to reset credit and to avoid reports of large balances to credit bureaux.

We can probably agree that this is not likely Citi’s target audience for the card. And it is worth noting that this critique is based not on actual experience with the card, but instead the most likely interpreation of the published Ts&Cs.

HansGolden in one of the post’s comments got me thinking about the possible intent for this card, “I look forward to hearing from the first card users to see if mid-month payments earn only 1%. If they do, it’s a deal breaker for me as I max and pay my cards multiple times per month. I suspect that’s not the intent, but I certainly could be wrong. There’s been a lot of emphasis put recently on promo deals to encourage people to pay their CCs instead of carrying balances.”

What happens with most credit card rewards when the account becomes delinquent? [edited for clarity and accuracy, see comments below] You forfeit the points. My wife’s company is slow to pay her Amex Corporate card so nearly every month the points are forfeited and can only be reinstated for $35 fee per statement. The paragon of wonderfulness according to many, the Fidelity Amex gives you two statements, “Points accrued during any Billing Cycle in which the account is two cycles or greater past due at the end of the Billing Cycle will not be awarded.”

For people living on the financial edge, they are mostly shut out of credit card rewards. If they are going to use credit cards, wouldn’t giving them some incentive to keep paying off debt be a good thing?

Read this way, the Citi card might actually be generous for its target audience. From all the terms I can find, it appears that the first 1% is awarded regardless of account balance status so long as there is activity every 12 months. Then the next 1% only requires that the minimum payment be made. From the Additional Information:

• Earn 1% Unlimited Cash Back on Purchases Earn 1% cash back on all your purchases, with no cap on the amount you can earn and no category restrictions.
• Earn an additional 1% Unlimited Cash Back as you pay for those purchases, whether you pay in full or over time Just make sure to pay at least the minimum due. You don’t have to wait until you’ve paid off a purchase to earn cash back on each payment.
• A Late Fee Pass You’ve got a lot going on. We understand. That’s why you get a pass on your first late fee. Just a little something that adds up to more peace of mind.

There is the proviso in the application that “When you become a cardmember, you will receive the full Citi® Double Cash Card Terms and Conditions,” which I cannot find online, so it is possible there are some weasel clauses to claw back rewards.

Is this possibly the first card to give rewards even when carrying a balance?  If that encourages customers to at least make minimum payments when they otherwise wouldn’t, and this gives them extra cash to do so, then maybe it is nice Citibank. If that encourages customers who otherwise would make full payments, to not, then I suppose it is Shitibank. That would be a more meaningful criticism than the narrow concerns of the manufactured spend tribe.