Am I wrong about the Citi 2% Cashback card sucking?
The answer is no, not really. (This post is part in jest and part “Okay, let’s run the math!”)
First of all, you’re supposed to earn 1% when you spend and 1% when you pay the card off. But when I looked at the terms and conditions (“pricing & information”) I found the following stipulation (found here):
Cash Back on Payments: You will also earn 1% cash back on payments you make that appear on your current month’s billing statement as long as the amount paid is at least the Minimum Payment Due that is printed on your billing statement and there is a balance in the Purchase Tracker. The balance in the Purchase Tracker is reduced by eligible payments you make. When the Purchase Tracker reaches $0, you won’t earn cash back on payments until more eligible purchases are made.
What kind of funky cashback card is this? Does that mean you have to run a balance in order to actually earn 2% on this card?
But let’s ignore the details of the card and just deal with the questions behind the questions, so to speak.
Let’s pretend the Citi card is a pure 2% cashback card that works normally and flawlessly.
Then let’s compare it to a card that you maybe would have gotten that gives $500 upfront. And let’s say you have a way to MS at a 1% loss and therefore 1% profit on this Citi card… you would have to spend $50,000 to break even with one credit card sign up bonus.
But the real question is why are you putting the $50,000 on that card?
Let’s call a spade a spade
This debate is really about the following: is the Citi card better than the Barclay Arrival Plus?
The answer is: for anyone who reads this site, the Barclay Arrival Plus is a way better card.
If you do no travel in the average year, NONE, than the Citi card is obviously better. Not better than the other 2% cashback cards – Fidelity Card, the Discover card.
But the Barclay Arrival Plus card is better than the Citi card in straight cashback for anyone who has travel expenses that could be covered. It’s better because not only is it earning 2% but you’re getting 10% of your points back when you redeem them for travel.
See the Barclay card reimburses travel at 1 cent per point. So let’s just round down and say the Barclay gives 2.2 cents per dollar and the Citi card gives 2%, but doesn’t have to be redeemed for travel.
* Update: HansGolden noted in the comments that there are tax reasons why he prefers the Barclay card (reimbursement) over the Citi card (cashback).
And let’s just forget the fact that the Barclay card comes with a 40,000 point sign up bonus worth more than $400 and the Citi card comes with nothing… except odd terms and conditions to keep a balance.
Because if you compare them on small spends and include the sign up bonus, the profit is incomparable:
| Arrival Plus $400 + 1.2% | Citi 1% profit | |
| $5,000 | $460 | $50 |
| $10,000 | $520 | $100 |
| $15,000 | $580 | $150 |
| $20,000 | $640 | $200 |
| $25,000 | $700 | $250 |
I think the above chart would at best describe most people. However, they should probably be spending their efforts with higher profit margins.
But follow me for one second to my main point…
Comparing the two cards via large spends:
| Arrival Plus 2.2% | Citi 2% | 1% Expense | |
| $20,000 | $440 | $400 | $200 |
| $50,000 | $1,100 | $1,000 | $500 |
| $100,000 | $2,200 | $2,000 | $1,000 |
| $200,000 | $4,400 | $4,000 | $2,000 |
| $500,000 | $11,000 | $10,000 | $5,000 |
First, although this isn’t my main point, note that even at $500,000 the profit is only $5,000 on the Citi card and would be $6,000 (plus $400+ for the sign up bonus) on the Barclay Plus. Even at a large level the Barclay card is way better.
But I personally, don’t like either option at this level. If I’m scaling that big, I’d hope my profits are a lot higher. But that’s besides the fact.
The main point is, clearly the Barclay card could be way better. But the naysay is that it isn’t a straight cashback card. Because the Barclay card is only this value redeeming for travel.
This is why I show total value of points earned and not just net profit. Because even though it’s not complete profit, I’m showing how much money you have towards travel expenses.
So if the Barclay isn’t the better card for your large uncatigorized bonus, you’re essentially saying:
- As someone who spends $20,000 on this card, I probably won’t spend $440 in travel
- As someone who spends $50,000 on this card, I probably won’t spend $1,100 in travel
- As someone who spends $100,000 on this card, I probably won’t spend $2,200 in travel
- As someone who spends $200,000 on this card, I probably won’t spend $4,400 in travel
- As someone who spends $500,000 on this card, I probably won’t spend $11,000 in travel
Again, anyone who says the Citi card is better for uncategorized spend is saying, “I would use the Barclay card and technically earn more value, but I’d never spend that much money on travel to reimburse”. And I just find that hard to believe for most people. $11,000 okay, yes that’s a lot of money. But I don’t plan to run $500,000 for $5,000 profit anyways.
So there are exceptions. Specifically: people who are going to spend upwards of millions of dollars on uncategorized bonuses and who won’t spend a lot of money on travel… that makes sense.
But to say this is the best card as one of those few people… seems delusional. This card is not the best cashback card for 99.99% of the people out there and I don’t want my readers getting it unless they too are spending millions on uncategorized bonuses… in which case, they probably don’t need my advice.
Really, truly, I know of people who have strategies that rely on a 2x everywhere kind of card, and at scales larger than they spend on travel. But just because someone somewhere does it on a 2% cashback card, does not mean this is the best card, or even a good card for most people. I personally see no reason that it would be better than the Arrival Plus.
Conclusion
1) Sign up bonuses go way further than you realize. And big bonuses in general. I prefer to make more off of a little work, than work really hard to make less. Sounds like a duh, but it’s not really.
2) For most people, neither of these cards are the best cards. I would start with cards like the limited time United 50,000 card (+5,000 for authorized users), the CSP, Ink Bold, etc… Because a roundtrip to Europe for 60,000 miles could be worth more than $600. So if you’re itching to travel, learn how to get miles and then how to use those miles. I have plenty of posts on stretching miles.
I sometimes forget, but if you’d like to learn the basics of earning miles from credit cards, you need to subscribe to my once a month newsletter. There’s a sign up below and in the top right. Because, when you sign up you get the “Complete Guide to Miles Earning With Credit Cards“. If you like the complete guides, you’ll love this.
![Nick of FM on #40kFarAway [TIF Podcast]](https://travelisfree.com/wp-content/uploads/2019/10/travel-is-free-podcast-nick-40K-120x86.jpg)
I think that what the terms and conditions mean is this: you can’t make a payment greater than the entire balance on the card and get 1% back on the excess over the balance. Any credit card company will gladly take more money than your balance on the card (interest-free loan to them). It shows up as a credit on your statement and will offset future purchases. But instead of making more purchases, you could just request a refund of the overpayment. If this clause wasn’t in the terms and conditions then they would have to change the name of the card to the Citi Free Money Card, because with no balance you could 1) make a payment, 2) get 1% cash back on the payment, 3) request a refund of the credit on your statement, and 4) repeat using the refunded money.
That would make a lot more sense.
It also prevents you from earning cash back on a balance transfer. They are only rewarding you for paying off purchases you made with their own card as opposed to a past balance that you transferred from another company.
100% correct. I will put every dollar I can onto Arrival rather than Citi. However, Citi has given me $72k of CL and Barclays has given me $20k. That practically limits how much I can put on Barclays, even as I’m maxing and paying all my cards multiple times per month.
In fact, you missed one super-crucial aspect of how the Arrival is better for business expenses, which is my scenario. The Arrival’s points can be used tax free for personal travel benefits. Any cashback card gives a rebate, thus is considered for tax reasons as a reduction in cost of item purchased, thus the rebate is non-taxable when used to buy personal items. However, a rebate to the cost of the item when it’s a business expense or COGS, it’s a reduction in the cost, which means you pay tax on that 2%. If you’re top bracket, that reduces your rebate to 1.2% vs. retaining the full 2.2% with the Arrival! Huge difference. (I’m not a tax professional. That’s my understanding of tax law, but I’ll run that by my certified tax professional before instructing my accountant to record things that way.)
Thanks for comment Hans. May add a note in the post pointing to your comment as well.
First, what Brad sad about the disclosure. It is a legitimate 2% card and they’re just protecting themselves from people creating credit balances with payments.
Second, enjoy your youth, but I am a financial adviser and have clients who are older or are in less than perfect health who find commercial travel difficult. Others who travel on business covered by their employer but not on their own dime. Yes, there are plenty of people who will go years without setting foot in an airport or hotel or will only do so for business travel covered by others, but who still use credit cards with regularity for everyday spending, and I can assure you they represent orders of magnitude more than 0.01%. Barclays won’t work for them.
Third, my oldest credit card, from 19 years ago, is a lousy Citibank card that I now know I can convert to the new Double Back card to both eliminate the annual fee I’ve been paying while keeping this wonderful long history. So I’m glad to have learned of it.
Fourth, I STILL agree with your criticism as it relates to bloggers who praise this card without making clear the limited number of people who will find it best. Even for clients of mine who want to keep things as simple as possible, I will likely be recommending the Barclays card to 80%. But the Citibank card to the other 20%.
Fifth, your rant stimulated a wonderful discussion on the blog and I’m glad you undertook it even if I might quibble with a conclusion or two. I feel confident pointing beginners in your direction, which is the highest compliment I can give.
Hey Less,
Very glad to hear you were able to convert a 19 year old card to keep it open with no annual fee. That indeed is a great tip, that I heard from Will (DOC).
Also, just thanks for commenting. I too am glad to have discussion on here. I think it keeps me sharp, thinking, accountable and discussion shows all the sides for everyone reading.
I do want to note that I kind of started out saying that I say the Barclay is better for everyone who would be reading this blog. My assumption is that only people who want to travel or do travel are reading this site.
Thanks again for the comment,
Drew
Why was discussion of the $89 annual fee for the Barclay Arrival+ omitted? It strikes me as a very, very large part of the calculus in this analysis…
This is a good point that is often overlooked. Having each card in the second year and beyond is a legitimate issue. That being said, I find many commenters/bloggers say that Barclay will simply waive the AF every year if you call and so do not take this seriously. I find that a bit presumptuous, frankly. I called Barclay to waive the AF on a card this spring, for example, and they would only take off half. It’s not a certainty. Many arguments are based on one’s own specific circumstances and people act as if it’s true for everyone else.
Why not just downgrade and get another one?
Point, Set, Match. You nailed it here, Drew.
Frankly, I’ve been surprised at the reaction from the bloggers who have attacked you and tried to defend this card. One says that, on the one hand, he is going to take a “wait and see” approach to getting this card for himself because of the unclear language in the T&C’s, but on the other hand he says that you are “completely wrong” for saying that this card “sucks.” This even after Matt from Saverocity confirmed with Citi that its NOT a true 2% CB card like Arrival or Fideltiy, but a 1%+1%, and that you don’t get the second 1% if you pay down the balance before the statement hits! The confusing and somewhat deceptive T&C’s on this card alone are a bright red line.
Many try to justify the value of this card by saying that it is a valuable downgrade option from one of the other Citi cards, which could be valuable for preserving ongoing credit history. Citi already has such an option for AA card holders–the no-fee Bronze AA card. I recently downgraded a Citi AA card I’ve had for 30 years to the bronze in order to preserve the ongoing credit history. When I asked the Citi CSR if I could keep the same credit card number with a downgrade to the Citi CB card, I was told NO. So, yes, I could downgrade, but NO I wouldn’t keep the same cc number. Depending on how Citi reports to the credit bureaus, this would likely result in the termination of the original card’s credit history. Now, this being Citi, I would have done a HUCA at least thrice before I took this for gospel–but buyer beware!
Small note…Matt didn’t *confirm* you wouldn’t get the 1% if you paid mid-cycle, it was just his speculation (which I think is wrong–I agree w/Brad, above)
Here’s the quote from Matt’s piece: “I called into Citi to explore this, and they confirmed that the Purchase Tracker updates at the end of the month. So, if you pay down a balance mid month, that just became 1% spend and 0% pay off bonus.”
That said and this being Citi we’re talking about, I’ll concede that anything that one CSR says over the phone falls far short of a confirmation! 🙂
This is really interesting. I just went and read his post.
http://saverocity.com/travel/citi-doublecash-scam-sham-shazam/
I’m unclear. He doesn’t make too big of a deal of it… but sounds like that would be a big deal. As the big deal is supposed to be its a no annual fee 2% card, but after the first year you’re going to be paying interest on the card greater than the 1% you’ll earn. No? At the point it’s less than 1% due to interest. What’s the deal with this card?
If what he says is true. That really is game set match.
You are misinterpreting what he was saying, I think. A credit card statement can close and you still don’t pay any interest charges until after the grace period is over (this is when your statement becomes due) which is usually 23-26 days but sometimes more and sometimes less.
In this case the double cash card the grace period is 23 days. This means you have 23 days after the statement closes to pay the bill before any interest is charged.
Matt is speculating that if you pay your statement mid cycle (e.g before the statement closes) you’ll end 1% cash back instead of 2%. He could be right, but the terms & conditions are vague enough that he could also be wrong.
This is really only an issue for people who are spending more than their credit limit each month. For the majority of people this won’t be an issue.
If you had to wait until after the statement was due to receive the full 2% cash back, then I agree this card would be worthless after the 0% APR finished. But nobody is suggesting that and there is nothing in the terms that indicates that is likely to be the case.
Drew is completely wrong about saying this card sucks. There is a middle ground between “sucks” and “best” which Drew has failed to appreciate.
This card will be a good option for some consumers, especially those without an AmEx Fidelity already and with a Citi card that can be downgraded that don’t regularly spend on travel.
There is no doubt that the Arrival is a good card and will be better for a lot of consumers and I don’t think anybody is arguing otherwise.
There is absolutely nothing wrong with taking a wait and see approach and I really don’t understand why you are so hang up on me saying that.
I think Drew knows that this card doesn’t suck, if Drew had said “These cards aren’t the best offers, here is why” then almost everybody would have agreed with him.
Saying which card is the best or worst is plain silly and screams attention-whore. Granted Arrival+ has much better signup bonus, there are a lot of people who keep their cards for more than a year. A major + of Arrival+ that nobody has cared to mention is its shopping portal while Citi has just discontinued its own portal. While some readers were correct that the accumulating fees over time would offset the large upfront bonus, it’s also fairly simple to offset the annual fee by shopping through the portal.
If you want simplicity of having a single card that is widely accepted, Citi CB card is the way to go. If you are simply trying to arbitrage the system for maximum benefit (I am not saying it’s wrong to do so), then the Old Amex Blue and other cards with huge bonuses are the way to go.
I mean, unless the Citi card only gives you 2% when you run a balance. Because that would be the worst.
Nailed it. Wont be waiting for the clueless pimps to eat crow and apologize for the absurd “analysis” and criticism.
There’s another cash back card worth mentioning – CapOne Spark Biz is 2% everyday and has a targeted $500 bonus with waived annual fee (I was targeted twice in two months and got $1K for my trouble). Very nice in that CB posts immediately and you can redeem in any amount (no $25 min nonsense). There’s also a $300 public offer out there. Downside is CapOne pulls from all 3 bureaus.
Amex also has Simply Cash.
do your analysis for year 2, and then say citi 2% cash back still sucks vs barclays. its the other way around in the 2nd year. its nice to have a 2% card when you are not working to meet minimum spend on another card.
You make a good point. I get another A+ for year two, avoid the annual fee and get another $400. :-p
for your spouse? i did them at the same time. afaik barclays wont let you do more then 1 for you.
Essentially it would take until the annual fee of year 6 kicks in for the sign-up bonus of the Barclay arrival card to be offset by annual fees.
Would you say that the amount of time that you intended to have the card for would impact your decision? For instance, if I am looking for a ~2% card to use for 7+ years, aren’t I better off with the citi doublecash? (Because annual fees of the Barclaycard would be 540 dollars at this point and the sign up bonus was only 440. The discrepancy between 2% and 2.22% is going to be much less than the effect of those annual fees, unless you’re spending lots of money).
Another area to look at is the opportunity cost. I would like to use my delta platinum amex for the companion ticket that comes with it yearly (the card’s AF is 195 and a companion ticket is generally worth more). If I use my citi double cash on regular purchases and pair it with my delta card for airline purchases, that’s more valuable to me than the Barclay arrival where I’m forced to use it on travel to redeem and skip the free checked bags/companion tickets.
I have the citi 2% double cash card. I spent $8,600 last month and just saw the satement, $86 in cash back, which is 1%. When it comes out of my bank draft in 2 weeks, I’ll get another 1%. It works great. I always pay it in full.
Now, here is one thing that drives me nuts. My amex card would send a text message and email for any purchase over $10. I love this feaure and Citi DOESN’T have it! It’s driving me nuts. I use this feature to track purchases for business. Are there any other cards that do 2% and have this notification feature>??
The Citi mobile lite app will give you push notifications for each purchase on your phone.
I have had this card since January and it is a true 2% cash back card. The reason there is confusion resolves around how Citi awards the cash for both the purchase and the payment. With Citi you get your money at the conclusion of each monthly billing cycle, unlike Capital One’s Quicksilver card that you actually earn immediately after it clears. This means there maybe payments still pending upon the closing of a statement period, which does mean you wait another month to get that cash at end of the next billing cycle. I did find one gotcha that isn’t easy to see that can reduce your 2% to something slightly less…If you select to redeem your cash back as a statement credit you won’t earn 1% on that amount as a payment. It’s treated like a purchase credit so it dodges “earn 1% cash back on payments”. Slimy practice since it’s basically the same thing but the simple work around, is to take the cash back as a direct deposit or some other form and pay your card as you normally would with the linked account.
Having used the Citi Double Cash for the past year I have to say that it is straightforward on what it offers. It takes away the headache of trying to “work the system” and track multiple cards. The Barclay is awesome but without the sign up bonus 95% of us are better of with the simplicity of the
Double Cash. Trust me.