Citi recently announced that it will soon begin replacing a number of its credit card accounts that are popular with regular travelers to foreign countries with new ones that eliminate currency conversion transactions, according to a report from the New York Times. The company will also simultaneously shut down PremierPass, Diamond Preferred Rewards, Simplicity Rewards, Home Rebate and Driver’s Edge Options cards.
Meanwhile, the new cards, dubbed ThankYou, ThankYou Preferred, Premier and Prestige, will make up for the lost fees by also discontinuing the programs that allowed cardholders to earn rewards points for every dollar of credit card debt they took on. In addition, it will introduce higher rates and fees for new customers signing up for cards for the first time. Those whose accounts are transferred from the old types of cards will not have their interest rates affected.
Citi's decision to axe it's very popular Simplicity Rewards program is one of the more curious decisions the company made, the report said. However, it may indicate that the lender is wary of its ability to drive revenues and profits with the card's more generous rewards program.
In the past, Citi had differentiated between frequent travelers' everyday purchases and "flight purchases," which meant that they often racked up airplane miles far faster than they did regular rewards points, the report said. By mandating, that these cardholders have at least as many points for their normal purchases as they did when redeeming airline miles. As a result, they repeatedly locked consumers into a cycle where they had to spend more to be able to get free flights.
With these new cards, however, consumers will earn more points and Citi will introduce no other restrictions on how cardholders redeem them, the report noted.
In recent months, many consumers have shied away from using their rewards cards because they typically carry higher fees and interest rates. Instead, they have moved on to accounts with fewer perks, but which also carry lower rates and fees.