With 5% cash-back card, Citi joins rivals in sweetening rewards

Citigroup is upping the ante in the battle for credit card customers with a new offer aimed at younger spenders eager to get back to travel.

Citi’s Custom Cash card will offer 5% cash back on eligible spending categories, like restaurants, groceries, some streaming services and travel. It has no annual fee. The bank is offering $200 bonuses to new cardholders after they spend $750 on their card in the first three months.

The deal comes two days after Wells Fargo announced an offer to compete with Citi’s Double Cash card, which advertises 2% cash back on every purchase.

Bloomberg News

Citi appears to have an eye on younger consumers. More than one-third of adults between ages 25 and 34 who participated in a survey by the bank in May said that their spending has changed in the past year, and they want new rewards plans. Two-thirds of them reported being eager to spend more money on travel as pandemic-era restrictions are being eased around the world.

Citi hired Pam Habner last year to head its branded card and unsecured lending business from rival JPMorgan Chase, where she led the rollout of the popular Sapphire Reserve card.

“We heard from customers that there’s a strong desire to carry a card that keeps up with them and automatically adjusts to their ever-changing lifestyle,” Habner said in a press release.

The card will offer a 0% annual percentage rate on purchases and balance transfers for 15 months, with a variable APR of 13.99% to 23.99% after that introductory period.

Revenues in Citi’s global card business declined 18% year over year to nearly $4.2 billion in the first quarter, in part because many customers used recent government stimulus payments and savings accumulated during the pandemic to pay down their card balances.

Those same factors have resulted in pristine credit quality in the card industry. Delinquency rates across credit card issuers settled at 1.89% in the first quarter, down from 2.7% in March 2020, according to Federal Reserve Board data.

Banks are racing to attract more consumer borrowers after pulling way back on such efforts in the early stages of the pandemic. Credit card originations climbed to 15.5 million in the fourth quarter of last year, up from 12.3 million in the previous three months and 8.6 million in the second quarter of 2020, according to a TransUnion report released last month.