There’s been boatloads of talk over the last year about the improvements to Citibank’s ThankYou points program. A great deal of that talk has been regarding the value of the Citi Prestige card, which has recently seen a rather impressive increase in posts around the blogosphere discussing it.
While I won’t get into the myriad reasons for that increase in posts, let’s just say that while I do think there’s a great deal of value to the Citi Prestige card, I do not receive any compensation if you agree with me and decide to sign up for one. (Though if you want to send me fifty bucks, I can provide a PayPal address.)
With that being said, the question that arises in my mind is whether we’ve reached the peak?
Citibank has put a great deal of resources into upgrading their ThankYou points program. But while the Conventional Wisdom is that there’s still room for improvement s (how about a domestic airline transfer partner, Citibank?), I believe it’s actually unlikely that Citibank can maintain some of these current benefits, especially on their premium Prestige card. That’s usually when a devaluation is in the cards.
Which benefits do I mean? Well, let’s take a look…
Flooding the market with ThankYou points worth 1.6 cents each.
One of the prime features of the Citi Prestige card is that you can get 1.6 cents per point against revenue airline tickets when you redeem ThankYou points on American Airlines flights (or codeshares in some cases). Unlike award tickets, revenue tickets earn both redeemable miles and elite status miles, which on American both still mean something.
So that 1.6 cents per point redemption option is an awfully valuable perk. In fact, it’s one of the best guaranteed perks out there.
Yes, even with the recent Arrival+ devaluation you can still get 2.11 cents per point with an Arrival+ card or 2% cash back with a few others. But none of those options offer as many ways to accumulate lots of points with little effort as Citibank. There’s a ton of opportunities to pick up ThankYou points, including 3 different ThankYou cards, generous retention offers, and lots of grandfathered point machines such as the old Citi Forward card and built up reservoirs of Flight Points.
Quite frankly, there’s a lot of ThankYou points out there. And if you have a Prestige card, every one of those ThankYou points is worth 1.6 cents in American airfare.
It’s likely that Citibank included this 1.6 cents per point option because for whatever reason they’ve been unable to sign up American as a true transfer partner and wanted to offer some sort of domestic redemption. So if they do eventually get American on board after the merger is complete, it’s practically guaranteed that this 1.6 cent benefit would go away. And in its place would be an AAdvantage loyalty program that almost everyone predicts is about to see a huge devaluation of its own because of the number of miles that American has minted in the last few years.
Or to put it another way, if American has so many outstanding miles that a devaluation is obviously coming, why wouldn’t the same be true of ThankYou points?
4th Night Free Benefit
Greg the Frequent Miler has been exploring the limits of the Citi Prestige’s 4th Night Free benefit, and suffice it to say they’re pretty impressive. You can get terrific value from this benefit, and while the process of booking it is rather wonky, it’s usually well worth the effort.
But given the amount of money Citibank must be spending on 4th Night Free credits, how long is it likely to last?
Unlike transfer partners, who sell points to Citibank at a greatly reduced cost, the 4th Night Free is a statement credit. That means it costs Citibank just as much as handing out cash. And a bank that hands out lots of cash at an excessive rate isn’t likely to stay in business for long. (Amex is currently attempting to disprove this theory with their Amex Sync Offers, but that’s a story for another post).
In any case, I can’t think of another credit card that offers a straight up free hotel night after booking just 3 other nights, and with all elite perks still intact. It’s a program that likely costs a lot to administer since customers have to book by phone, so I’d bet it’s on the chopping block sooner rather than later.
$250 Airline Fee Credit (including airline tickets)
When American Express pioneered the airline fee credit for their Amex Platinum card, the idea was to give people an option to replace the Continental lounge access that was being lost around the same time. They could use the credit to buy lounge access, or for any of the other fees which have quickly blossomed over the last few years as airlines attempt to wring every last dollar out of customers without actually raising airfares.
(By the way, this is why you should never believe any chart that attempts to demonstrate that airfares haven’t gone up over time. Yes, airfares have remained roughly the same, but hundreds of millions of dollars in annual ancillary fees have been added to the pile that don’t show up in those pretty little graphs put out by airline lobbyists and public relations specialists.)
So when Citibank added an airline credit to their Prestige card, they apparently decided they needed to one-up Amex by making their credit applicable to airline tickets as well, not just fees. Oh, and they made it $50 more too.
Now, one could argue it doesn’t matter — both Amex and Citibank capped those credits at a level they believe is sustainable, so it makes no difference whether the credits apply to airfare or just airline fees. However, a certain amount of unused credits go into those calculations as well. Some people simply won’t use their credits, either because they don’t know about them or don’t understand them. Yet if you make the credits easier to use, they’ll get used more often. That’s what Citibank has done.
Sure, folks in the know can easily capture the Amex airline fee credit. But even folks not in the know will likely end up cashing in on Citibank’s airline credit. They might even do it accidentally when they charge a ticket to their Prestige card.
Easier to use benefits = more often used benefits = more costly benefits = future devaluation.
The Devil’s Advocate says grab a Prestige card while it’s worth it.
Gary over at View From The Wing often notes that if an opportunity is several standard deviations better than the median program, it won’t last. While there’s many subjects that Gary and I disagree on (especially any topic with the initials T, S, and A), I think he’s dead on with this particular observation. And while Citibank might not yet be several standard deviations better with their Prestige card, I think these particular benefits are awfully close to it, if not already there.
Some people are going to be annoyed by this post because they’ll think I’m giving Citibank ideas. Trust me, Citibank has plenty of people analyzing their Prestige cards and already know which perks are costing them more money than they can afford. They don’t need me to tell them that. But folks who are trying to decide which cards to include in their next set of applications should have an idea of what the future might hold.
So if you’re thinking about picking up a Citi Prestige, I encourage you to do so now. Not later. Now. Do it while it’s still worth doing. And don’t forget about sending me the fifty bucks.Devil’s Advocate is a bi-weekly series that deliberately argues a contrarian view on travel and loyalty programs. Sometimes the Devil’s Advocate truly believes in the counterargument. Other times he takes the opposing position just to see if the original argument holds water. But his main objective is to engage in friendly debate with the miles and points community to determine if today’s conventional wisdom is valid. You can suggest future topics by following him on Twitter @dvlsadvcate or sending an e-mail to email@example.com.
Recent Posts by the Devil’s Advocate:
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Find the entire collection of Devil’s Advocate posts here.