Citi's smart card: pointless gimmick or clever innovation?
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In her March 20 New York Times "Bucks" blog, Tara Siegel Bernard wrote about the impression she recently made on a cashier in a Manhattan cafe. When she came to pay for her sandwich, he said "Wow!" not just once but three times. No doubt the attractive Ms. Bernard is used to guys saying "Wow!" in her presence, but on this occasion the object of the man's admiration was the Citi G2 card with which she paid for her purchase.
Smart rewards cards
And you can see his point. The snappily named "Citi ThankYou 2G Card with Request Rewards" Bernard was using has the same dimensions (including much the same thinness) as a traditional credit card, but comes with two (count 'em) buttons along with one red and one blue flashing light. Just as well it also comes with an embedded battery that's predicted to last for the lifetime of the card. (Presumably, that forecast may not necessarily apply if you often use your card to unlock doors, scrape ice from your windshield, etc.)
Buttons and flashing lights. Who could fail to be impressed? But what do they do? Well, push one button, the "regular credit" one, and the blue light flashes while the data on the magnetic stripe are written to allow the card to be used in the same way as any other credit card. However, push the other button ("request rewards") and the red light flashes. Then the data are written so that Citi knows you want to redeem 1,000 of the rewards points you've already earned (if you're a Citi ThankYou Preferred or Premier cardmember; 1,200 if you have a Citi ThankYou card) to pay or part-pay for the purchase. A billing cycle or two later, you should receive a statement credit for $10. If you don't have the necessary 1,000 or 1,200 points, the transaction should be processed as a standard credit purchase regardless of which button you pressed.
A good deal?
Bernard reckons that the penny a point (or less) you get when redeeming in this way is "unremarkably average" compared to other rewards credit cards. But she goes on to observe that it's better than some of the options on the Citi ThankYou website. For example, a statement credit for $15 will cost you 2,500 points there, she says, which is an exchange rate of 0.6 cents per point, according to this blogger's calculator. However, there are better deals on the site that match the ones being offered by the new redemption technology, including selected retailer gift cards at a penny a point.
Citi unveiled its G2 credit cards (the ones with the on-board electronics) back in October 2010, and began piloting them with a relatively small number of customers (including, no doubt by chance, a certain New York Times writer) soon after. The original announcement wasn't greeted with universal enthusiasm.
Writing for Time, Brad Tuttle wrote a piece that month under the headline "Citibank's Credit Card 'Makeover': Why I'm Already Not a Fan of 2G Plastic." He identified four major criticisms of the innovation:
- It adds an extra layer of complication at the point of purchase.
- It feels like something for nothing, but you're burning through points that you've already earned, and these actually have value.
- It feels instant, but in reality "at most, you're getting to use your rewards a few days earlier with the new 2G cards."
- It encourages shoppers to see spending money as even more of a game, and the last thing we need now is something that promotes more credit card debt.
Americans who are smart
Is Tuttle right? Maybe, in parts. Your blogger doesn't really buy his first point about the the system being too complicated, or his last about it promoting credit card debt. It's fashionable in some quarters to portray the American public as dumb (and, to be fair, there have been a few presidential election results in living memory that call its judgment into question), but on the whole we're a reasonably smart bunch.
How credible is it that a significant number of us can't figure out which of two buttons to push, or understand that buying stuff with a credit card that has flashing lights involves exactly the same debt obligations as using one with no lights? Of course, some may be in denial about the connection between spending and owing, but how much difference could $10 rewards redemptions really make?
No, if your blogger has an objection, it's this: What's the point? It must cost a lot to make a G2 card, but the benefits it delivers appear negligible. The value of the rewards points you redeem using it isn't necessarily higher, and you don't get them instantly. And what else do you want from this sort of new technology other than better value and speed? Unless, that is, you want to impress cashiers in sandwich shops.
Enhancing the credit card offer
And yet your blogger's still a cheerleader for G2, though you'd pay good money not to see him in his micro-skirt uniform. A couple of years ago, BusinessWeek identified "20 dying technologies," and number three on its list was credit cards. It predicted that alternative technologies that bypass existing payment systems might soon emerge that would render the business models of credit card companies unsustainable.
Wouldn't that be a loss? For all its faults, wouldn't we miss the credit card industry: its consumer protections, its rewards, its familiarity… its sheer convenience? At least Citi is attempting to innovate with G2, harnessing new technologies that may enhance what a credit card offers its customers, and so keeping the industry relevant. The fact that, 18 months after the launch, it still hasn't rolled out its new plastic to all its customers may be indicative of problems. But at least it has the cojones to try. And that deserves a very high cheer-leading pyramid.
Published 04/02/12 (Modified 08/23/14)