Citibank Reduces Cashback Incentive for Cardholders

Contributed by mm | August 22, 2006 12:53 AM PST

It is official. Following Amex's lead to cut back reward card incentives, Citi is announcing that cardholders of Citi Dividend Mastercard, its flagship cashback card, will receive much less cashback rewards in 30 days.

WSJ reports:

"Holders of Citigroup's Citi Dividend MasterCard have begun receiving 30-day notices that as soon as October they will receive 2% cash back, rather than the current 5%, on purchases they make at those locations using their credit card.
...

Citigroup, however, while cutting back the amount of its cash-back rewards, is offering Citi Dividend MasterCard cardholders more types of businesses where they can receive cash back. Purchases made at convenience stores and utilities, including cable operators, will be eligible for 2% cash-back rewards when the card is used. Cardholders are eligible to receive an annual maximum of $300 cash back."

PFBlog readers are no strangers to Citi's generous cashback credit card offerings. In fact, back to March 2004, Citi Dividend Card was among the first few cards I recommended in the blog. As a consumer, it is sad to see we have one less choice, but as a Citigroup shareholder, I can understand 5% on everything shopping, especially gas purchases, is a huge expense to retain customer loyalty, and I believe this move will further improve the shareholder value of the company.

So what should smart cardholders do? My recommendation is still a Citibank offering -- Driver's Edge Platinum Select Card. In fact, it offers full 6% of your gas and grocery bills for 12 months:.

Features:

• Earn Rebates for Every Mile Driven
• 6% Rebates on Gas Station, Supermarket, and Drugstore Purchases for 12 Full Months, 3% Rebates after, and 1% Rebates on All Other Purchases
• 0% APR on Balance Transfers for 12 Full Months and No Balance Transfer Fee
• Rebates Can Be Applied Toward Car Maintenance, or to Buy or Lease a New or Used Car
• Rebates Can Also Be Applied to the Thank You Network
• No Annual Fee

While Driver's Edge is not exactly a cashback card, the rebates you accrued can be redeemed toward car maintenance (including oil change) or car purchase. Take a look at the Driver's Edge Survival Guide we published last year and the full review we have in PFBlog Credit Card Guide section. You may apply here to start your journey as a proud car owner and cardholder!

This Post Has Received 3 Comments. Share Your Opinions Too.

Foo Commented on August 27, 2006

I'm guessing the 5% deal was an effort to get cardholders to use the card for day to day purchases. Chase cut back their equivalent card months ago.

The Citi 'Thank You' cards at this time haven't reduced the 5% on the gas/grocery/drug stores. Although you can't get cash back, the closest you can get is a 1:1 gift card after 5,000 points for $50 at a plethora of stores.

HeJustLaughs Commented on September 14, 2006

Do the scalebacks only apply to the Citi Dividend Mastercards? Mine is a Citi Dividend Visa.

Credit Cards PI Commented on December 12, 2006

It's sad that a credit card company will "lure" in new customers with an attactive offer like 5% cash back-- then change it's program terms shortly after. I'm sure Citi knows the majority of cardholders won't switch to another offer because it's just too much of a hassle. So in the end, the credit card company wins again!

For the savvy consumer, it would be wise to switch to another offer and maximize their rewards. Hopefully, other credit card companies don't follow suit and lower their rewards too!