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Will the citi double cash last?

Established Contributor

Re: Will the citi double cash last?

One problem I see Citi made in launching this card is that it had 0% intro from the beginning. No one is paying interest on their balances on the card right now unless they missed a payment or defaulted. 

 

What they should have done is skip that for the first year or so and let all the early adopters that are revolvers pay interest on their Double Cash balances and get a good mix to balance out the transactors. Then introduce the 0% intro period as new and improved for new customers only and I would think it's viable for Citi to survive on. 






EX FICO (AMEX): 728 (4/29/17) | TU FICO (Discover): 737 (4/7/17) | EQ FICO (Citi): 746 (3/28/17)
Super Contributor

Re: Will the citi double cash last?


lotsOfPens wrote:

I never knew utilities generated so little profit for card companies. Interesting.

 

What I'm wondering though is why lenders wouldn't just terminate the accounts of those who PIF every month if they're literally continually losing money on those customers. It's one thing if a card has no rewards, but once you factor in even 1% cashback, the bank's profits become razor thin. 1.5% is pretty much the break-even point, in a best case scenario. And of course, that's even before the overhead with maintaining an account is factored in. And also before factoring in the interest-free loan part... 

 

Are banks just hoping that these kind of customers will make them money in other ways (high savings balances, car/home loans, etc) at some point down the line? That seems like very long odds when there are so many choices for a consumer.


If everyone who was an unprofitable customer got shut down, the default rate would skyrocket.

 

Risk vs Reward. Long term gain vs Short term gain.

EX FICO  16 INQ  791
EQ FICO  10 INQ  786
TU FICO  12 INQ  790
Total CL$477,00038 TL
Super Contributor

Re: Will the citi double cash last?


14Fiesta wrote:

One problem I see Citi made in launching this card is that it had 0% intro from the beginning. No one is paying interest on their balances on the card right now unless they missed a payment or defaulted. 

 

What they should have done is skip that for the first year or so and let all the early adopters that are revolvers pay interest on their Double Cash balances and get a good mix to balance out the transactors. Then introduce the 0% intro period as new and improved for new customers only and I would think it's viable for Citi to survive on. 


What stops people from canceling their card and reapplying for a 0% intro? Smiley Wink

EX FICO  16 INQ  791
EQ FICO  10 INQ  786
TU FICO  12 INQ  790
Total CL$477,00038 TL
Contributor

Re: Will the citi double cash last?


longtimelurker wrote:

I think that the assumption is that, odd as it seems, "many" people use high bonus cards for general spending as well (don't know better, only card they have, can't be bothered to scramble for small amounts of rewards etc).  This discussion has been brought up lately with the change in the T&Cs of Chase, is it OK to use Freedom for only 5% categories.


 I think this is where I screwed up on my SM recon a while back. I should've told the rep that I was "looking for a go-to, everyday spend card"... I know better for next time. Smiley Happy

 

Edit: Also need to make sure I mention that I like to "fly a lot" (even though I don't)...



Last app: 5/26/2015 (Sams Club Mastercard)
Super Contributor

Re: Will the citi double cash last?


lotsOfPens wrote:

longtimelurker wrote:

I think that the assumption is that, odd as it seems, "many" people use high bonus cards for general spending as well (don't know better, only card they have, can't be bothered to scramble for small amounts of rewards etc).  This discussion has been brought up lately with the change in the T&Cs of Chase, is it OK to use Freedom for only 5% categories.


 I think this is where I screwed up on my SM recon a while back. I should've told the rep that I was "looking for a go-to, everyday spend card"... I know better for next time. Smiley Happy


Why? What'd you tell em'?

EX FICO  16 INQ  791
EQ FICO  10 INQ  786
TU FICO  12 INQ  790
Total CL$477,00038 TL
Contributor

Re: Will the citi double cash last?


Nixon wrote:

Why? What'd you tell em'?


 The truth. Namely I wanted a card that I could abuse and rake the issuer over the coals with on grocery and gas purchases. Smiley Happy  Maybe not in those exact words, but that's probably what it sounded like to the nice lady.



Last app: 5/26/2015 (Sams Club Mastercard)
Established Contributor

Re: Will the citi double cash last?


Nixon wrote:

elPatitoFeo wrote:

longtimelurker wrote:

elPatitoFeo wrote:

LearningFast14 wrote:

I see that people here (and elsewhere) are very excited about the citi double cash. This got me wondered whether I should get on this. However, for the reasons below, I decided to not go this route. I write this in case some people might find it useful. 

 

How can a bank possibly make a profit out of a flat 2% cashback? 

 

Some people have gotten the double cash as a Visa by doing product changes, but generally speaking it is a Mastercard. So how much does your bank make when you ...

 

My conclusion

There have been multiple 2% cards throughout the years. The Schwab card and the Priceline card are proof that 2% flat is not always sustainable. Those cards however had APR comparable to the Fidelity Amex. It seems that here citi is betting that the higher APR will be able to make up for the lower swipe fees of the Mastercard as opposed to Amex network. Since it is looking like we are going to be in a very low interest rate environment for many years to come, I have doubts that the doublecash will be sufficiently profitable to remain around for many years. So, at least for me, the answer is clear: stick with the Fidelity Amex. 


 

I don't understand why people make good arguments, grant you, about the viability of this particular card, while nobody does the same for Sallie Mae, for example.  Sure, they are capped, but for that cap, they must be getting creamed.  And, I assume that beyond that cap and for other non 5% rewards purchases, people use other cards.  So, how is that card viable?  I see DC more solid than Sallie, which, granted, ain't saying much, but still.

 

 


I think that the assumption is that, odd as it seems, "many" people use high bonus cards for general spending as well (don't know better, only card they have, can't be bothered to scramble for small amounts of rewards etc).  This discussion has been brought up lately with the change in the T&Cs of Chase, is it OK to use Freedom for only 5% categories.

 

What is different about DC and other 2% general cards is that there is no "OK" spending possible  (assuming the assumptions are correct)


 

Yeah, unfortunately we don't have the juicy numbers, dammit!  It would be very interesting to know how many people do general spending with Sallie, or how many people don't PIF with DC.   It we knew those things, the answer would be obvious.

 

Lets not forget that we, in this forum, have more knowledge about these matters than more than 99% of the population, so the bankers expectation of non-optimal customer behavior is probably right... which means these cards will continue to be very profitable for people on places like this.  Let's enjoy, be merry and eat some bloody piece of broccoli!Smiley Surprised   See?  That just doesn't sound right....Smiley Embarassed

 

 


9/10 of my purchases on SM are 5% purchases.


 

I almost never charge anything on a 5% category card that is not in the 5% other than by error. None of the issuers that give me 5% cards make money off me yet they all seem to love offering me cards and CLIs. The only issuers that might be making money off me now are Chase (CSP) and Citi (Double Cash) since those are where all my non-5% purchases go (not gas, groceries, department stores, amazon, etc). And even they can't be making too much since all my CSP purchases are 2x point purchases and double cash is effectively 2%. 

 

But I am sure they make their big bucks off high APRs people are silly enough to pay on rewards cards. I have friends who carry crazy balances because they carry balances during intro APRs but don't pay down their cards during introductory APRs. They earn well (starting pay in my field is generally 160k+bonuses and most earn more) but that just gives them high enough limits to get even further into debt. People who make bad financial decisions help keep the CCCs cash rich and willing to give out rewards cards. I mean for every dollar they lose to people like me they earn 10 more dollars from people who carry higher APR balances on rewards CCs instead of lower APR balances on non-rewards CCs (or better yet no CC balances). 

Established Contributor

Re: Will the citi double cash last?


Nixon wrote:

14Fiesta wrote:

One problem I see Citi made in launching this card is that it had 0% intro from the beginning. No one is paying interest on their balances on the card right now unless they missed a payment or defaulted. 

 

What they should have done is skip that for the first year or so and let all the early adopters that are revolvers pay interest on their Double Cash balances and get a good mix to balance out the transactors. Then introduce the 0% intro period as new and improved for new customers only and I would think it's viable for Citi to survive on. 


What stops people from canceling their card and reapplying for a 0% intro? Smiley Wink


You can cancel and re-apply, but if you have had the card, you are inelegible for any signup bonus on this card - similar to (AMEX?)

 

Also, if a revolver canceled the card, they would have to PIF the balance and would forfeit the 1% from payments because the account is "closed"






EX FICO (AMEX): 728 (4/29/17) | TU FICO (Discover): 737 (4/7/17) | EQ FICO (Citi): 746 (3/28/17)
Established Contributor

Re: Will the citi double cash last?


14Fiesta wrote:

One problem I see Citi made in launching this card is that it had 0% intro from the beginning. No one is paying interest on their balances on the card right now unless they missed a payment or defaulted. 

 

What they should have done is skip that for the first year or so and let all the early adopters that are revolvers pay interest on their Double Cash balances and get a good mix to balance out the transactors. Then introduce the 0% intro period as new and improved for new customers only and I would think it's viable for Citi to survive on. 


 

I believe their intention is to train their new customers to carry a balance, and then they take the 0% away, and their "Pavlov" customers will start paying interest...

 

 

Super Contributor

Re: Will the citi double cash last?


14Fiesta wrote:

Nixon wrote:

14Fiesta wrote:

One problem I see Citi made in launching this card is that it had 0% intro from the beginning. No one is paying interest on their balances on the card right now unless they missed a payment or defaulted. 

 

What they should have done is skip that for the first year or so and let all the early adopters that are revolvers pay interest on their Double Cash balances and get a good mix to balance out the transactors. Then introduce the 0% intro period as new and improved for new customers only and I would think it's viable for Citi to survive on. 


What stops people from canceling their card and reapplying for a 0% intro? Smiley Wink


You can cancel and re-apply, but if you have had the card, you are inelegible for any signup bonus on this card - similar to (AMEX?)

 

Also, if a revolver canceled the card, they would have to PIF the balance and would forfeit the 1% from payments because the account is "closed"


Signup bonus, Implying they are giving any cashback bonus or statement credit with this card.

 

When you reapply, You reapply under the terms being offered at the time. Easy. BT your balance to another card, perhaps a no fee CU card or CapOne and BT it back once you have your new one.

EX FICO  16 INQ  791
EQ FICO  10 INQ  786
TU FICO  12 INQ  790
Total CL$477,00038 TL