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Is it Safe to Go Back to the Citi? Weighing in on Citibank’s Turmoil

by on November 18, 2011

Weighing in on Citibank’s Turmoil

Citibank has been in the news a lot lately, and not for the right reasons. In 2009, the company closed thousands of active credit card accounts without warning because it was losing money on its rewards system.

Then, exactly two years later, Citibank had 30 Occupy Wall Street protesters arrested for trying to close out their own accounts in protest of the company’s unfair practices. Most notably, though, the financial giant’s credit card division has been reeling ever since a massive database hack over the summer compromised the account information of 360,000 customers, resulting in nearly $3 million in fraudulent charges.

Following the incident, the Wall Street Journal reported that Citibank intended to close its private-label card division altogether. For many, it seemed like the era of “too-big-to-fail” credit card lending was finally coming to an end.

Private-label credit cards are not the same as standard credit cards. Also known as retailer credit cards, private label cards are issued through Citibank by a retail affiliate. They typically tend to attract a lot of “bad” credit because they only require a fair credit rating to obtain, they carry high APRs and they can only be used at the issuing retailer. In other words, these are not the credit cards that most consumers apply for.

In the end, after reporting higher-than-expected quarterly profits, Citibank decided to keep the entire private-label division on life support rather than burying it. This isn’t to say that the corporation has ignored all the turmoil surrounding its credit cards. Following its database compromise, Citibank came up with three new credit card offers to woo back wary consumers. How you feel about them is up to you to decide, but here’s our take:

  • Citi Simplicity Card. A totally new card issued by Citibank this past July, the Simplicity card is known for the three major perks it gives cardholders: no late fees, no penalties and a single interest rate for all purchases. According to CitiCard CEO Jud Linville, the card is “for those who are juggling busy schedules and want a credit card with simple terms.” Considering that the card has no rewards system to speak of, it seems most suitable as a way for consumers with a history of bad credit to begin rebuilding their score while they work on developing responsible habits.
  • Citi Dividend World MasterCardJust in time for the holidays, Citibank is also offering a $200 bonus to new cardholders who spend $500 in the first three months after opening a Dividend World card account. The straight-cash bonus is currently the market’s largest, and the fact that the card gets you 5% cash back on groceries, gas and other purchases until January 1st doesn’t hurt, either. Once the promotional period expires, though, the bonuses for using the card drop to a meager and universal 1%.
  • Citi ThankYou(SM) Preferred Rewards Card. With Citibank’s “big spender” offer, spending $2,000 on Citi’s ThankYou card within three months of opening the account will net you $250 in gift cards. Unlike the Dividend World card, the ThankYou card starts out with a flat one-point-per-dollar bonus rate, and it also rewards cardholders with a yearly bonus.

Citibank’s new line of credit cards are a real paradox. While they certainly aren’t the best pieces of plastic on the market – especially considering how good the company’s rewards program used to be in 2008 – their signing bonuses are shoulders above the competition. Additionally, the Citi Simplicity card might be just the tool many consumers need to rebuild their credit score after Citibank ruined it. To decide if any of these cards are right for you, compare them with the rewards systems and interest rates of their competitors. In the end, the decision is up to you.

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