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Citi and the lost $282 Million

Aim_High
Senior Contributor

Citi and the lost $282 Million

I was posting on another thread about Citibank where there was some discussion about the Costco card, among others. 

 

The Citi Costco card give you 2% cash back on purchases at Costco or Costco.com. 

 

Like most members, I love Costco and the 2% back (started before flat 2% cashback cards became more prevalent) seemed like a great deal.

 

The Citi card (and it's predecessor AMEX card, to be fair) pays your cash bonus annually in the form of a paper check attached to your statement.  The check is redeemable only in person at Costco.  You can either cash or apply the balance to purchases.  Obviously the intent is to get you into a Costco store again and encourage you to spend more money.  Of course, Citi would also love it if you would just forget to bring that darn paper check to Costco within the expiration period (I think 180 days?)

 

If you do remember, and you choose to apply your check to new purchases, you lose the opportunity to make that 2% on those purchases on your card.  Doesn't sound like a big deal, right?  I think I'm an average Costco customer.  For my family, my check has averaged probably about $150 over the years.  So I'm losing $3 every time I redeem my Costco check for purchases instead of cash.  I just looked it up and did the math.  Costco has 94,300,000 members. 

 

So if I am typical and if all Costco members were to redeem for purchases instead of cash (which is something I did mindlessly for years), Citibank is saving 94.3 million x $3 or a total of $282,900,000 in potential cashback bonuses.  Smiley Surprised  (... not to mention how many people never cash those checks at all.)

 



Length of Credit > 35 years; Total Credit Limits > $500K
AoOA > 28 years (Jun 1993); AoYA (Aug 2020); Gardening since 08/15/20.
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Message 1 of 22
21 REPLIES 21
redpat
Senior Contributor

Re: Citi and the lost $282 Million

I doesn't matter if redemptions where for purchases or cashback it's all the same. 

 

So there is no loss of $282 Million.



Personal Cards: Amex Plat | Amex Delta Res | Amex Hilton | CSR | Citi AA Exec Business Cards: Ink+ | Amex BGR
Message 2 of 22
Aim_High
Senior Contributor

Re: Citi and the lost $282 Million


@redpat wrote:

I doesn't matter if redemptions where for purchases or cashback it's all the same. 

So there is no loss of $282 Million.


If you are Executive Member, you still get the 2% back on annual purchases.  But that's not what I'm talking about.  I'm talking about the cash back on your card.  The Executive Member reimbursement check is separate from the Citi Costco card check.

 

Separate from the Executive Member 2% rebate program, Citi Costco card pays 2% back on purchases at Costco.  If you buy $300 worth of mechandise and apply that $150 cash back check to the total, your new subtotal and what goes on your card is $150.  They don't give you the new cashback based on the Grand Total, only on your new charges.  You lost the cash back on the other $150 that reduced your total. 

 

 



Length of Credit > 35 years; Total Credit Limits > $500K
AoOA > 28 years (Jun 1993); AoYA (Aug 2020); Gardening since 08/15/20.
* Hover cursor over cards to see name & CL, or press & hold on mobile app.
Message 3 of 22
Anonymous
Not applicable

Re: Citi and the lost $282 Million

Sounds like business as usual for Citi. Citi DC rips you off too. 

Message 4 of 22
AverageJoesCredit
Mega Contributor

Re: Citi and the lost $282 Million

I won the Powerball.....




By the time i found my ticket, i was SOLSmiley Wink
Message 5 of 22
redpat
Senior Contributor

Re: Citi and the lost $282 Million

It's just like the CSR $300 credit.  You didn't pay $300, you only paid $150.  The same could be said about anyone who choses to pay for purchases via points Chase and Amex do the same thing.



Personal Cards: Amex Plat | Amex Delta Res | Amex Hilton | CSR | Citi AA Exec Business Cards: Ink+ | Amex BGR
Message 6 of 22
NRB525
Super Contributor

Re: Citi and the lost $282 Million


@Aim_High wrote:

I was posting on another thread about Citibank where there was some discussion about the Costco card, among others. 

 

The Citi Costco card give you 2% cash back on purchases at Costco or Costco.com. 

 

Like most members, I love Costco and the 2% back (started before flat 2% cashback cards became more prevalent) seemed like a great deal.

 

The Citi card (and it's predecessor AMEX card, to be fair) pays your cash bonus annually in the form of a paper check attached to your statement.  The check is redeemable only in person at Costco.  You can either cash or apply the balance to purchases.  Obviously the intent is to get you into a Costco store again and encourage you to spend more money.  Of course, Citi would also love it if you would just forget to bring that darn paper check to Costco within the expiration period (I think 180 days?)

 

If you do remember, and you choose to apply your check to new purchases, you lose the opportunity to make that 2% on those purchases on your card.  Doesn't sound like a big deal, right?  I think I'm an average Costco customer.  For my family, my check has averaged probably about $150 over the years.  So I'm losing $3 every time I redeem my Costco check for purchases instead of cash.  I just looked it up and did the math.  Costco has 94,300,000 members. 

 

So if I am typical and if all Costco members were to redeem for purchases instead of cash (which is something I did mindlessly for years), Citibank is saving 94.3 million x $3 or a total of $282,900,000 in potential cashback bonuses.  Smiley Surprised  (... not to mention how many people never cash those checks at all.)

 


The total of 94 million is worldwide.  

Something like 64 million Costco members in the US. It is unlikely all those have a Citi Costco card. This also presumes spend of $7,500 on the card during the year, which is probably good for a subset of members. 

 

The concern over the missing $3 seems like nothing to be concerned about.  There is a much larger “ loss “ for members who use a debit card to buy at Costco.

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Message 7 of 22
digitek
Established Contributor

Re: Citi and the lost $282 Million

There are all types of ways that card companies nickle and dime rewards like this.  CSR had to make a change so that you definitely don't get UR for the $300 travel credit, and if UR is redeemed for travel then you don't get 3 UR on that travel spend, effective CSR return comes out to 4.3% or so because of this, not 4.5% like you would think.  Not a bid deal at all to the average consumer, but to Chase it is millions of dollars.

 

Citi DC and getting reward back as statement credit instead of check/direct deposit is like this, too, the rate would be 1.98% at that point.

 

The real killer here and money maker for the bank is inflation.  If you don't redeem your rewards often then you are always losing buying power.  Money at the beginning of the year is worth ~3% less by the end of the year.  It is almost an interest free loan that you make to the bank until you redeem.  The bank likes people who hoard points/cash rewards.

 

I also ran the math for bit and if you keep your money in a high yield savings account (~1.9% like Ally or Amex) and auto-pay your CC on statement due date, in essence keeping your money in a savings account until the very last minute, you would save about .35% or so in a year.  The bank is giving you an interest free loan in some cases for as long as ~50 days, and you can gain interest on that in a guaranteed product if you really want.  Doesn't net you much in the end unless you have a lot of annual spending, though.

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Message 8 of 22
Aim_High
Senior Contributor

Re: Citi and the lost $282 Million


@redpat wrote:

It's just like the CSR $300 credit.  You didn't pay $300, you only paid $150.  The same could be said about anyone who choses to pay for purchases via points Chase and Amex do the same thing.


That is correct that the same "loss of potential points or cash" can occur with other programs when you offset against an AF or redeem for merchandise or travel.  Maybe we could just broaden the topic to loss of rewards redemptions in general.

 

Rationalizing that "everyone is doing it" doesn't mean the example isn't accurate or relevant. 



Length of Credit > 35 years; Total Credit Limits > $500K
AoOA > 28 years (Jun 1993); AoYA (Aug 2020); Gardening since 08/15/20.
* Hover cursor over cards to see name & CL, or press & hold on mobile app.
Message 9 of 22
Aim_High
Senior Contributor

Re: Citi and the lost $282 Million


@NRB525 wrote:


The total of 94 million is worldwide.  

Something like 64 million Costco members in the US.

It is unlikely all those have a Citi Costco card.

This also presumes spend of $7,500 on the card during

the year, which is probably good for a subset of members. 

 

The concern over the missing $3 seems like nothing to be

concerned about.  There is a much larger “ loss “ for members

who use a debit card to buy at Costco.


I didn't see a verified statistic from Costco but 64 to 65 million

of those 94.3 million might be accurate.

Costco has 762 warehouses worldwide with 527 in the U.S alone.

527/762 = 69.16% of warehouses in USA.

If you assume relatively equal membership,

69.16 x 94.3 million would equal 65,217,000. 

 

Costco targets more upscale consumers. 

Lower-budget consumers aren't generally drawn to warehouse stores with annual membership fees.

On the other hand, even a casual observer can see the merchandise is positioned for the firm middle to upper-middle class consumer who is a little less concerned about price as much as value for their money.

Putting $7500 annual spend on a Costco membership for these consumers (Average $625 per month) is nothing.  (Remember this includes gas, groceries, and everything else Costco sells including vacation packages and higher ticket items.)

According to a recent survey, over 10 percent of Americans did their main grocery shopping at Costco

and over 22 percent of households did at least some of their shopping with the retailer.

 

I imagine there might be as many as 2/3 of Costco members with a Citi Costco card.

It's aggressively pitched and doubles as a membership card.

That would be about 43 million US members with a Citi Costco card.

That would still be $129 million in potential cash for Citi. 

My point was not the exact figure.  That was just a rough off-the-cuff estimate.

The point was that the lost bonuses are big money for Citi.

 

I'm not "concerned" about the $3. 

This is a forum discussing credit cards and lenders.

I just made that observation and thought it would be interesting to share with the community.

But I agree that the debit card users are also "losing out."

 

Costco_2018_members.jpg

 



Length of Credit > 35 years; Total Credit Limits > $500K
AoOA > 28 years (Jun 1993); AoYA (Aug 2020); Gardening since 08/15/20.
* Hover cursor over cards to see name & CL, or press & hold on mobile app.
Message 10 of 22
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