Is Citibank on a death wish?
 

I was thinking about all the crazy promos that citibank has going... Starting with the "awesome" TY fixed point redemptions, continuing on the repeated bonus availability on the same card and currently churning on the AA cards. It makes me wonder what Citibank is up to? I mean, this would seem to be completely unsustainable. FT (and savvy non-FT) community is taking them to the cleaners. It is hard for me to come up with a reason as to why Citi thinks this is in their interest. And I am solely talking about the repeated bonus availability. This is not attracting new customers as by defination, churners are repeat customers. And your average Joe/Jane will get these cards for one time bonus, no need to give them out again and again. Can anyone think of any logical business reason for this apparent suicidal behaviour on the part of Citibank? And how do you see this panning out in the next 6~12 months?

Maybe they might do something about churning in the next year or so, but it is probably not as big of a problem for them as you might think, i.e. for every churner there may be 10 people who get the card and keep it, maybe even more. I noticed my friend using an AA Citi card to pay for our lunch the other day and asked her how long it took to get her 30K miles and she had no idea what I was talking about; she has had the card for several years. In addition, while most churners pay off their balance in full, a lot of other people do not, and the interest rates can be pretty high on mileage credit cards. So I think the impact of churners to Citi is minor, otherwise they would prohibit the practice.

I agree with you, but you do not need to allow churning to realize those benefits. So why allow churning at all? I don't see anything for Citi in this.

One benefit that Citi gets from the churners is cheap advertising. They know most people will probably tire of churning but keep the card. The people who churn also talk to others about the card. Those people may apply for one or possibly 2 "new" cards - but again, they will tire of the churning.

Hard core churners are probably a very small percentage of the Citi cardholders so churning is not a significant impact.

Just my opinion.

Here's a question I had, maybe this isn't the right thread but I thought I'd give it a shot.

I think I understand the concept of churning CCs. Sign up, keep card until bonus is deposited, cancel card, wait certain amount of time, sign up again, repeat above.

My question is, doesn't this wreak havoc on your credit scores? I guess if you own a home and aren't planning on moving/refinancing/getting a car anytime soon it may not matter, but still. What does this do to your credit score/how do you avoid it getting lowered by constantly getting/canceling cards?

PM me if this isn't something kosher to talk about in the open...
Thanks for any help.

Number of inquiries in past (12 months, iirc) does have a negative effect on your credit score.
I believe you can expect a 5-15 pt drop for an inquiry?
I'm sure there is a 'maximum' number of pts you can lose.
Number of open accts also has a factor. If you are churning, you're not increasing the number of open accts...and that is good.

If you are not planning to buy a house / car / refinance loan / etc, letting your credit score fluctuate doesn't have a terrible effect. Stop churning, wait for the inquiries to clear, and your score will go up again.
If you have good credit, churning probably wont' drop you below 'pretty good' credit.

I was carrying balances on 2 other cards and when I opened 3 Citi cards my score went down and Discover cut my limit on my one card.I have no plans to buy a car etc and my score will rebound with time.Everyones situation is different.

Not quite.

Number of 'New Accounts' opened does increase with each churn. When you close that account (after your sign on bonus has paid out for example), that 'accounts recently opened' negative effect does not decrease after the account is closed either.

Thus, two definite items hitting you each churn:
1) inquiry
2) New Account opened.

The only thing that removes these two negatives is 'time'.

Fortunately, they don't affect your score all that much. I churn constantly, and I'm still above 730 on Experian (and the other two I'm near 800 because Citi doesn't inquire on Trans Union or Equifax).

This behavior is far from suicidal. By and large it has to be a money making venture for the bank, else they will not keep it going as long as they have.

Just consider the fact that about 6 years back Chase and Wachovia were giving huge amounts of UA miles for opening HELOCs. We opened the HELOCs, took out large loans and wired back the money the same day/next day. That amounted to an average of ~300K miles for <$100 in interest and other fees. Some FTers did this repeatedly on multiple properties and raked in a couple of million miles each. Banks did not go down because of this. They went down by losing hundreds of billions on sub-prime loans. These mileage bonuses are chicken feed to them. And the number of people out to collect miles is very small compared to the total CCs and new accounts coming their way. It is the cost of doing business. Some people will use the loopholes and it has to be accepted for the larger goals they have set for themselves. So I would not lose any sleep over Citi offering some promotions. Their stock did not go down from $60/share to <$3/share because of promotions.

I agree. Mileage bonuses might be chicked feed to them, but what I am having a hard time understanding is why let people churn? What more are they getting out of letting people churn than not letting them churn? What has Citi figured out that all other big CC companies have decided otherwise? Is there a great marketing bulls-eye that Citi has hit that others have missed? The only thing that someone mentioned is the publicity and thus getting new people to sign up, which seems reasonable. But when I think about it, it seems like a long shot. My circle of friends are those that swear off credit cards and those that are hard core (as to getting the last blood out of a deal). My recommendation to my friends will only serve one purpose. Get my hard core mileage junkies to do the same thing that I do, while my other friends are not going to act on it. So in a way, it is a net loss to Citi. It is very very hard to get new people to play this mileage game, the initial threshold is very high, IMO.

Clearing up soem Info
 

Inquiries remain on your credit report for 24 months not 12, and an inquiry has an effect of 2-5 points per my experience

Agreed completely. Besides Citibank has been declared "too big to fail", so no matter what they do we as taxpayers will all be bailing them out forever.

I have found that the churning of credit cards will reduce your credit score by about 30 points. Depending on where you are on the curve, this may, or may not, be significant.

For me, it is not significant because, even with churning, my Experian score is above 765.

If you carry a balance on other cards, opening another account decreases your debt/available credit ratio, which could be a good thing. Then when you close it, you then increase your debt/credit ratio, a bad thing. Bad things pobably affect scores more than marginally good things. If you don't carry credit card balances, the ratio probabaly doesn't have much of an impact.

Back on topic--CB does not have a death wish. It is already dead. All that is keeping the doors open is the US of A guarantees of deposits.

But, that's good enough for me. At least as long as I owe Citi money rather than the other way around.

As for the churning, since Citi has already gone down the tubes the execs may have other concerns at the moment.