Citi Puts New Twist on Price Protection

Citigroup (NYSE:C) is offering price-conscious shoppers a new way to save – by promising partial refunds on certain credit card purchases if it can find a better deal.

The company on Tuesday unveiled Citi Price Rewind, a new service that will scour hundreds of shopping Web sites for 30 days after a card holder makes a purchase. If Citi finds a price that's at least $25 less than what the consumer paid, the customer is eligible for a refund equal to the difference between the two price tags.

The Citi service has similarities to certain existing products that promise to refund customers if a lower price is found. But Citi is pitching its version as more consumer-friendly than offerings from competitors. A holiday promotion from PayPal offers to match prices found within 30 days, but with that service, customers must hunt down the lower price themselves.

"Citi card members don't have to find and prove a lower price," said Ralph Andretta, head of co-brands and loyalty at Citi Cards, during a conference call with reporters. "We do the work, and there's no onus on you to prove that you found a lower price."

Though Citi's customers will not have to search the Web for lower prices, they will still have to take two actions.

First, customers must register their purchases on Citi's web site. And later, after receiving an email from Citi notifying them that they are eligible for a refund, they must file a claim, which can be done online, and must include a copy of their receipt. Looking ahead, Citi officials said that they will be looking to automate as much of the process as possible.

Citi officials said that Price Rewind will be most useful on big-ticket purchases, which makes sense, because a $25 price difference is more likely on a $1,000 item than on a $100 item.

The program comes with some fine print, of course. Numerous categories of purchases are ineligible, including cars, boats, jewelry, airline tickets, and purchases made from outside the United States. Refunds to an individual customer are capped at $1,000 per year.

Price Rewind is being rolled out at the start of the holiday shopping season, but Citi said that it will remain in effect year-round. The first television ads hit the airwaves Tuesday.

Citi's Price Rewind is part of the industry-wide trend to drive consumer spending to credit cards, said Marty Mosby, an analyst at Guggenheim Partners. That's because price caps have made debit cards less profitable, and consumers can no longer tap into their home equity for large purchases as they did during the housing boom.

"They're reconditioning the consumer to say, ‘Look, if you use this credit card, we're going to give you these advantages,'" Mosby said.

Moshe Orenbuch, an analyst at Credit Suisse, does not see the service as a game-changer in the competitive market for credit card perks. He speculated that most consumers likely won't take advantage of Price Rewind, and that many of those who will participate are people who would be willing to search for lower prices themselves.

"I'm not sure this is going to be the one factor that is going to bind you to a credit card so that you pay that one before the others," Orenbuch said.