CIti may add miles/points to sweeten online savings rates
File this under “Interesting” for now, as there are very few details and this could be a total bust, but here’s the deal:
In a statement at an investment conference, a Citigroup executive named Stephen Bird stated that when Citi launches their online app-based savings offering later this year, they don’t plan to compete with high-interest rates. That’s no surprise as it’s been quite some time since they have done so – it’s probably been more than a decade. The given reason is that they want people that will bank online but also be more sticky with the bank – a move I get though I personally think that offering consistently good rates would accomplish that.
The statement made following that though. is what perked my ears up:
“Instead, the bank will market the accounts nationally to its credit card customers, such as holders of its Double Cash card and cards it issues for American Airlines Group, and Costco Wholesale Corp and Home Depot Inc.
Bird said, for example, that offering additional American Airlines mileage credits will attract stable deposits to the bank.”
(Bolding and italics mine)
You can read the full text of the article here.
This kind of cross-promotional move between bank divisions and offerings is something I’ve long advocated. Texas-based Bank Direct is the only mainstream vehicle right now to earn miles with your banking deposits, though Citi does already offer small amounts of Thank You points based on your deposit account level (but not based on balance).
And Chase has made small moves to attract the Ultimate Rewards crowd to its Private Client offering by offering 50,000 Ultimate Rewards points to upgrade to Chase Private Client and move in new deposits.
If you have a customer that likes to accrue a certain currency (be it your own bank’s points or a partner’s miles), attaching that to their deposits just makes sense
The question is around how Citi will implement this. Citi has been known to issue 1099s for earned miles in the past, while Bank Direct does not 1099 for any value of the miles, making them tax-free – meaning that you’d have to earn almost twice as much as you value a mile before you’d be negative earning miles.
Additionally, will Citi correctly calculate how much incentive will sway the deposits? Somehow the total offering (interest + bonus points/miles) still needs to match the likes of Goldman Sach’s Marcus online bank or startup Beam, that is projecting 2-4% rates once fully launched.
if they want to attract the deposits of their more savvy customers. My own view is that many of Citi’s wealthier customers are also savvy ones that don’t want a lower yield for their cash when they can have a higher one at the click of a button. It’s not “hot money” if it stays put and it stays put when there aren’t considerably better options all around you.
Let’s see how this plays out…