Citi is launching a credit card that automatically adapts to users’ spending, rewarding them with 5% cash back on up to $500 in one eligible category where they spend the most money, the New York City-based bank announced Thursday. The card users will earn 1% cash back in all other areas.
The no-annual-fee Custom Cash Card comes with a $200 cash-back sign-up bonus after users spend $750 in purchases within the first three months of account opening, as well as a lower introductory rate on purchases and balance transfers for 15 months.
- News of the card rollout comes days after Wells Fargo announced its new Active Cash card offering, which aims to compete against Citi’s Double Cash product. Card issuers are looking to rebound from a slow 2020 in which shoppers' habits were muted amid the COVID-19 pandemic, and often turned to debit as opposed to credit cards.
After a dearth of new credit card launches in 2020, Citi’s new Custom Cash Card is an example of how activity is starting to pick up, said Ted Rossman, an analyst at CreditCards.com.
"Credit card issuers were very cautious in 2020. They originated 25% fewer accounts compared with 2019, and the total credit limits of those newly originated accounts were down 37% year-over-year, according to Equifax," Rossman said. "As we approach the midpoint of 2021, we’re seeing more signs of recovery, including heightened marketing spending, increased consumer card usage and elevated sign-up bonuses. The credit card industry isn’t all the way back yet, but it’s getting there."
Citi, the world’s top card issuer, said Custom Cash reflects millennials’ desire for a card that mirrors their changing spending habits.
"Citi research shows that 82% of Millennials' spending varies month-to-month based on their shifting interests and priorities and 87% express a desire for a credit card that does the work for them to maximize their rewards based on their changing spending patterns," the bank said in a statement.
Citi’s head of U.S. branded cards, Pam Habner, a former JPMorgan Chase executive who helped create the bank’s popular Sapphire Reserve card before joining Citi last year, called the new card a "game-changer in the industry."
"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 statement.
Citi is also betting customers are ready to resume many activities that were put on hold amid the pandemic, and are eager to reap the rewards.
The Custom Cash categories where card users can earn 5% cash back include restaurants, gas stations, grocery stores, select streaming services, select travel, select transit, home improvement stores, fitness clubs, live entertainment and drugstores.
Meanwhile, Wells Fargo is set to launch Active Cash next month. The San Francisco-based bank’s new offering will give users 2% cash back on all spending, a 0% annual percentage rate on purchases and balance transfers for 15 months, and a $200 sign-up bonus after customers use the card for $1,000 in purchases within three months.
Wells Fargo also plans to launch a low-interest-rate card in the coming months and a new rewards card line next year, according to Bloomberg.