mikesyr18

The Prestige was useful for the $250 credit (which was basically a reimbursement of your paid AF), the 4th night free benefit, and the generous trip cancellation/interruption insurance.

In other words, hotel junkies loved the card.

The Prestige would've been hands down the best travel card had they kept Admiral's Club access, 3 rounds of free golf, and added American Airlines as a 1:1 transfer partner. Perhaps they should've found a way to add those features (or add them back) when the CSR came out.

A good point. Citi increases the airline redemption value by 25% with the Premier card... Perhaps Citi should've made the rewards structure on Premier and Prestige exactly the same, but gave the Prestige a 50% bonus redemption value when redeemed for flights. So basically 4.5% on all travel including gas, 3% on dining and entertainment, and 1.5% on everything else.

I would still like to see an issuer charge a premium AF but give a premium rewards structure.... Ex: $450 year card, but it has 10% cash back on dining, 5% cash back on gas, 5% cash back on groceries, 5% on entertainment, 2% back on everything else. I'm not sure how attractive or profitable that would be though.

akr1970akr

That's a fair point, but for the CG person holding Prestige / Premier and booking 4NF through the portal they basically get 1.15 (Gold points kickup at year end) x 1.25 (premier) / .75 (prestige 4NF) = 1.91% back for admittedly a very constrained kind of redemption.....but lots of other random perks (PP, Concierge, Trip Ins) on a card that is basically $100 a year. I actually consider the card free given that it uplifts the organic TYP we get for banking. And for most Citi cards, except for recent efforts with Prestige, there is a real chance that retention will lower the long run holding cost. We've only gotten a offer on that once, in 4 tries.

I'd think a BOA customer getting the 75% uplift on their cashback could potentially be Citigold by moving over some random brokerage holdings. And that's just on basic spend of course. So I guess I'm saying that Prestige isn't so bad even on that dimension. Lets put it this way: I used to have my SO put all her non bonused stuff on Double Cash, but after looking at it, and realizing it's really more like a 1.98 or something when you get a statement credit I don't care now if we use Prestige for unbonused stuff, since its a pretty small difference and sometimes the protections of the higher card might matter.

akr1970akr

The whole bank and network system are only getting 2-3% from the transaction, and they do need some of it to keep it running, keep anti fraud systems etc. Even 2% is tough to offer unless one assumes some breakage on rewards, carelessness about late payments/fees, and people running 16% balances. Even the prosperous Costco clientele had a 20% of account holders running revolving interest bearing balances. As a practical matter people basically build their own high cash back cards by just combining cards, and picking carefully when paying. Maybe when cards rewards are designed in isolation it doesn't capture that, but surely now the big banks can look at how consumers optimize.

If we had less cash paying consumers in our economy, all this subsidies off their backs would shrink. Although I bet many of the folks who pay cash in our modern world aren't paying taxes anyways.

joe_miami

Now you're arguing the Prestige not only isn't good now, but needed to be better than it was when it probably was costing Citi a fortune, both in actual dollars and in terms of cannibalizing its AA offerings.

LOL. Ten percent cash back on dining and 5% cash back on a list of other categories with a swipe fee of 3% or less? You're simply not being serious in this discussion. You might as well suggest 30% cash back.

mikesyr18

I literally give up with you. You are solidly incapable of understanding anything.

Those cash back rates compliment a $450 AF with no travel perks or anything like that. Obviously a card with that earning rate and a $450/year fee would promote high spenders only.

joe_miami

So Citi would lose on each transaction, but they'd make up for it on volume?

LOL.

Again, you're either not being serious here or you're simply very bad at basic math.

mikesyr18

If Discover can afford to charge a $0 AF and cash back match on a 5% credit card (with rotating categories) during the first year... How wouldn't an issuer like Citi, charging a $450 AF each year not be able to afford it?

What's the break even point for spending on a $450 AF at 10% cash back? $4,500 in spending. I'm not saying it's the most perfect idea, but it's a new idea that banks could implement... Paying out much higher rewards while charging a premium AF is the point I'm trying to make here. I think Citi should implement a card that costs a premium AF but pays out larger rewards than all other cards in existence (but with no travel perks).

Citi can collect the AF, swipe fees, and pay out premium rewards.... More than any other issuer does on any of their cards. 10% might be much... Perhaps 7% back on a category or two and 2% back on everything else. Idk... I don't feel like running the numbers to satisfy you, but I'm sure you get the point (I hope).

joe_miami

Because basic math.

Discover's is a first-year promo/loss leader. Your proposal would be at double the cash back for the lifetime of the card.

Again, you're suggesting that Citi would lose on each transaction but somehow make up for it on volume.

Citi apparently had trouble getting people to acquire and/or keep the Prestige at a $450 annual fee that was, in effect, only a $100 or $200 AF before all other benefits kicked in. Why would anyone who spends less than $4,500 per year pay a $450 AF for your proposed card, and how would Citi or any other issuer make money on such a card from people who spend $4,501 or more per year?

mikesyr18

Let's take a look at an example: AMEX Blue Cash Preferred.

The net fee is $95 but it pays back more on groceries than any other card (6%) as well as a healthy 3% on gas station purchases and department stores. Yes the groceries category is capped, but so could the highest category on the card I'm inventing, although to a much higher level. A cardholder makes $380-$95 just on grocery purchases if they max out the category... Way more than the annual fee and that's not even factoring in the 3% on gas and department store purchases.

Now take this $450/year card, cap the highest categories) (let's make it 8% on up to $15,000 in spend/year, and that would be one decent solution to your issue. Instead of paying out $400 year to airlines for club access, paying out $250 to airline incidentals, and then providing the reimbursement of a 4th free night after taxes, the cost would go straight to rewards given to the cardholder instead.

Like I've said, I won't sit here and run the numbers to satisfy you, but you should get the principal of what I'm talking about.

I wouldn't mind having a card like that. $1,200 in rewards for maxing out the 8% categories and then 1% or 2% on everything else with an AF of $450. I'm sure Citi was spending more than $1,200/year/cardholder on the Prestige when it had those perks from a couple of years ago. Cit would also be making some of that $1,200 in paid rewards back in interchange fees.

joe_miami

LOL. 8% cash back on up to $15,000 in spend/year just in the restaurant category would be a $750/year loss for Citi before any other cash back in other categories. I can't believe you're persisting with this.

Citi wasn't paying $400/year to AA for lounge access, and, as I've explained about six times now, Citi breaks even on 4NF and probably makes money overall, since it makes money on all bookings of under 4 nights and over 4 nights made at ThankYou.com.

You wouldn't mind being gifted over $1,200 per year? Who would? That's the problem here.

No way in the world.

mikesyr18

You seem to have this assumption that Citi doesn't pay anywhere near full price for the cost of perks.

I'll explain it again. Why would any company pay Citi enough to profit from the 4th night free benefit? The travel partner Citi goes through also has to make money, as does the hotel. If the cost to Citi is $500 for the benefit, Citi isn't making $500 or more in commission. There's not a chance in the world Citi breaks even or makes a profit from this benefit. Every time you assume this benefit doesn't cost Citi tons of money makes me laugh out loud.

How much was Citi paying for Admirals' club access? $400 is still about a $100-$150 discount from the full cost of a membership to the lounge. Do you really think American Airlines would take a steep loss here by giving Citi a discount of over $150 a customer? Nope. American won't just give away a bunch of their profits so Citi can get a large discount, so their cardholders can have access to the lounge. If Admirals' club access was cheap for Citi, the benefit wouldn't have been pulled. After all, why pull a benefit that's cheap to give out to cardholders and tick them off? Just take a look at the AA Executive card... $450 AF. Citi obviously charges that fee to cover the cost of the Admiral's Club that American charges them for.

You assume other companies will take major profit hits so Citi can take on little cost from what are otherwise costly perks to everyone else.

mia

Prestige did not include an Admirals Club membership. It allowed access when flying AA. Citi probably paid AA a fee per visit, considerably discounted from the published day pass rate.

There are number of plausible reasons, aside from cost, that Admirals Club access was removed. It could be that the product manager for the Executive card successfully objected to Prestige undercutting the co-branded product.

joe_miami

You don't seem to understand even the basics here, even after they've been explained multiple times by multiple people, so I'm going to bow out.

mikesyr18

I think you bring up some good points. I never thought about Citi paying per day pass at a discount.

As always, good info, Mia.

mikesyr18

Well I'm terribly sorry we disagree on your assumption that the Prestige was a profitable card for Citi.

I guess they woke up one day and decided to remove Admirals' club access, reduce the 4th night free benefit to before taxes and to the average of the four nights, and remove the three free round of golf even though they were "highly profitable" perks.