The biggest news in the credit card, points and miles world this week has been Citi’s announcement of upcoming changes to its premium credit card, the Citi Prestige Mastercard. Many points-and-milers hold the Prestige card, which earns Citi ThankYou Points (TYPs) for purchases. It currently has competitive earning rates of 3x TYPs for airfare and hotels, best-in-class travel delay protection, and other benefits that made it a decent choice for travelers, despite a recent devaluation in the summer of 2017. Most notably, though, the Prestige card has a unique feature that many travelers used to generate truly outsized value – the 4th-night-free benefit for hotels.
A few weeks ago, Citi pulled the Prestige card so that it was not available for new sign-ups. Its announcement was vague, and many speculated whether the Prestige card would be gone for good, or whether Citi would be re-vamping the benefits.
It turns out that Citi has indeed updated the benefits on the Prestige card, and it will re-open the Prestige for new applications sometime in January 2019. It has also announced updated points-earning, benefits and a higher annual fee that will go into effect in three phases – some in January 2019, another in May 2019, and others in September 2019.
Now that the rumors have subsided and we have some solid facts about the updated Prestige card, we wanted to analyze the changes. First, we’ll summarize the details of the changes to the Presige card. Next, we’ll analyze the changes, identify some as-yet unanswered questions, and give you our take for what it means going forward.
Details of the Upcoming Changes to the Citi Prestige Card
As we mentioned above, the changes to the Citi Prestige card will come in three waves – one in January 2019, another in May 2019, and a third in September 2019.[Hat Tip to The Points Guy for providing details actually confirmed by Citi]
First, in January 2019 (exact date has not been announced), the Prestige card gets several positive enhancements:
- Some bonus categories for TYP-earning will increase:
- 5x TYPs per dollar of spend on air travel (previously 3x)
- 5x TYPs per dollar of spend on dining (previously 2x)
- 3x TYPs per dollar of spend on cruise lines (previously 1x)
- Cardholders will receive $250 annual credit for travel purchases in general (this is broader than the current $250 annual credit for airfare only)
- The Prestige card will re-open for new applications
Next, in May 2019, we see another positive change:
- Prestige card will add cellphone protection for damage and theft (details have not been released)
And finally, in September 2019, several negative changes go into effect:
- 4th-Night-Free benefit will be limited to twice per calendar year
- No more 25% bonus when booking air travel through the Citi ThankYou portal – this means that TYPs would be worth only 1 cent per TYP for airfare through the Citi TY portal, rather than 1.25 cents
- Current 2x TYP earning for Entertainment category goes away
- Annual fee increases to $495/year (currently $450) (however, Citigold and Citi Private Bank clients apparently will be grandfathered in to their current $350 annual fee)
All other current benefits of the Prestige card will remain the same, such as:
- 3x TYPs per dollar of spend on hotel purchases
- Citi Price Rewind price protection
- Global Entry/TSA PreCheck application fee credit
- Trip delay insurance
- Missed event protection
- Ability to transfer TYPs to Citi’s airline partners (all 1:1)
- Avianca LifeMiles
- Cathay Pacific Asia Miles
- Etihad Guest
- EVA Air
- Flying Blue (Air France & KLM)
- Garuda Indonesia
- Jet Airways JetPrivileges
- JetBlue TrueBlue
- Malaysia Airlines Enrich
- Qatar Privilege Club
- Singapore Airlines
- Thai Airways Royal Orchid Plus
- Turkish Airlines Miles & Smiles
- Virgin Atlantic Flying Club
The Key Unanswered Question for Us, and Our Analysis
For us, the key unanswered question related to these changes in the Prestige card is this:
(1) Will holding the Citi Premier card continue to allow you to redeem TYPs for travel on the Citi ThankYou portal for 1.25 cents per point (25% bonus)?
At this time, we almost exclusively redeem TYPs to book flights on American Airlines at 1.25 cents per point. This makes the most sense for us given our current travel profile. These tickets earn Elite Qualifying Miles (EQMs) and Elite Qualifying Dollars (EQDs) with American, which we need to help us earn elite status. They can also be upgraded using benefits such as Systemwide Upgrades (SWUs), Miles+Cash upgrades through the AAdvantage program, and Upgrade Certificates through American’ Business Extra program.
Currently, we travel overseas 3-4 times per year, mostly on American to Europe. On those trips, we can usually purchase relatively cheap economy or premium economy seats using TYPs (or Chase or Amex points). Then, if we strategically select our flights to maximize our upgrade chances, we can use one of the upgrade instruments to move into business class. We also often use TYPs (or Chase or Amex points) to pay for our domestic travel and earn EQMs and EQDs toward elite status with American.
Given that travel profile, a drop from 1.25 cents per TYP to 1 cent per TYP would seriously hurt the value we receive. But since we also hold a Citi Premier card, we can hold on to that value if the Premier’s benefits stay intact.
That said, as we move forward and eventually have more free time to travel, our travel profile may change. With longer blocks in which to travel, we’ll probably make trips to Asia, Australia/New Zealand, and the Middle East. At that time, mileage redemptions on Citi’s airline partners (and their travel partners) to get ourselves into business class for these longer trips may become far more important to us. And those benefits aren’t changing at this time; to the contrary, we may be able to use the enhanced bonus categories to earn even more TYPs
Other Important Unanswered Questions
Here are some other important questions that remain unanswered at this point:
(2) How will the new 4th-Night-Free benefit limitation – 2 times per calendar year – be implemented in 2018?
To us, this is confusing and very uncertain. Will the limitation be enforced based on when the booking is made, or when the stay occurs? If we can make unlimited bookings through the end of August 2019, then we can effectively extend the 4th-night-free benefit well into 2020 if we book far in advance and make reservations that can be canceled without penalty. But if the 2x/year limitation is based on when the stay occurs, then we’ll be limited to 2 uses in 2020, regardless of when the booking is made.
The situation for 2019 is even more confusing. What about if we have 3 4th-Night-Free stays in January through August 2019? Are we then precluded from using the benefit again during September-December 2019? Or might we receive up to 2 4th-Night-Free stays during the September-to-December 2019 period, regardless of how many times we’ve used the benefit from January through August? That’s a big difference. If we have unlimited uses from January through August and then up to 2 more uses in September-December, that will be much, much better.
At this time, I don’t believe we have any good hints of how the limitation will be implemented.
(3) What will the sign-up bonus be when the Prestige re-opens for new applications?
This obviously makes a huge difference if you’re thinking about applying for a new card and are eligible. Historically, the sign-up bonus for the Prestige card has varied wildly, from 75,000 TYPs to zero.
You would think that Citi would want to create a splash when it re-opens the Prestige for applications with an enticing bonus – 50,000 TYPs at the very least, or perhaps 60,000 or even 75,000. But with Citi, you never know.
This question has some direct implication for us, as Philly will become eligible for a sign-up bonus on the Prestige or Citi Premier card in May 2019. If the bonus and ongoing value of the Prestige card are good enough, it might be a prime candidate for her. Our readers will have to make similar decisions, considering the value proposition of the sign-up bonus and the ongoing benefits of the Prestige, their Chase 5/24 status, and many other factors.
(4) What retention bonuses will Citi offer on the Prestige card going forward?
This one is also a complete unknown, but it will have a material impact for us. Citi has run the gamut for us in terms of retention offers – from the best offer we’ve ever received, on the Citi AT&T Access More card late last year, to a big fat zero on the Prestige card a few months ago.
For now, we’ll make sure we have put a decent amount of spend on the Prestige card during our cardholder year, and we’ll hope for the best come March when our annual fee posts.
Our Take on the Changes to the Citi Prestige Card
Needless to say, there are positive changes and negative changes coming to the Prestige, and where you come out depends on how you use the card.
- If you’re a heavy user of 4th-Night-Free (and I’ve always imagined there are some traveling consultants who make bank on this, several thousand dollars a year), then the twice-per-year limitation kills your gravy train.
- If you’re using 4th-Night-Free a bunch at high value hotels, it might even make sense to get a second or third Prestige card once the limitation goes into effect – Is this even possible?
- If you use the 1.25-cent redemptions heavily like we do, and the rate drops to 1 cent per TYP, that’s a brutal devaluation of point balances and it seriously impacts your baseline value of TYPs.
- Hopefully Citi will let us know soon if the Premier card will continue to let us redeem TYPs at 1.25 cents going forward. For now, our understanding is that Citi has said that nothing about the Prestige is changing at this time.
- If it’s going to be 1 cent going forward, at least we have a few months to burn our TYP balances at 1.25 before September 2019.
- I can see arguments either way for whether Premier will retain its “1.25 cents per TYP” benefit. On the one hand, that benefit would incentivize Prestige cardholders to also get/keep the Premier and pay the Premier’s $95 annual fee. Besides, the Prestige and Premier “1.25 cent” benefits have already been misaligned for some time – the Prestige gave 1.25 cents only on airfare; whereas the Premier gave 1.25 cents on a broader range of travel, including hotel redemptions. On the other hand, Citi is making a big move to go up to 5x on airfare and dining, and it seemingly fees that it must offset that increase by decreasing the redemption value – under that thinking, how in the world could it leave this obvious loophole that would allow the increased TYP-earning rates plus 1.25 cent redemptions?
- For us, it’s hard to evaluate the new bonus earning categories and whether we’d use them, without knowing the answer to the 1.25 cent versus 1 cent question. If TYPs can only be redeemed at 1 cent (and assuming we don’t have useful transfer-partner redemptions), then 5x TYPs on dining would be worth 5%. In that scenario, we’d do better using the Amex Gold at 4x Membership Reward (MR) points, which we’d value at 6% or a little more. But if 5x TYPs can be redeemed at 1.25 cents, then the return on dining is 6.25% and the Prestige looks much better.
- Another thing you’d have to assess, if you use your Citi/Chase/Amex points for partner transfers, is how you value the different groups of partners. Maybe Chase Ultimate Rewards (UR) points are most valuable because you like to transfer points to United or Hyatt. Or maybe Amex MR points work best for you because you prefer to transfer to Air Canada (Aeroplan) or Delta.
- The $45 annual fee increase hurts everyone (aside from the grandfathered Citigold or Citi Private Bank clients) and makes it that much tougher to get outsized value for the card.
We can use a rather simple analysis as a starting point for our keep-or-cancel decision on the Prestige card for next year. The annual fee is $495. You’ll receive a $250 travel credit that should be relatively easy to redeem. You can take that at face value, leaving $245 to make up, or you can discount it to somewhere in the range of $195 to $245, leaving a difference of $250 to $300 that has to be made up through other benefits. From there, consider the 4th-Night-Free benefit. If you can use it once or twice in a year to save at least $300, then you’re net positive on the Prestige.
I’ve held the Prestige card since early 2016. To get a clear picture of the I went back and analyzed our 4th-Night-Free (4NF) usage:
- 2016 – 3 uses – $517, $326 and $518
- 2017 – 0 uses – (one 4NF reservation was made but canceled)
- 2018 – 4 uses – $184, $629, $93 and $132
That’s 7 uses over 3 years. Total benefit = $2,399. Average benefit/use = $343. If you adjust the 2016 savings to the current rules (taxes and fees are no longer reimbursed, and the savings rate is the average of the 4 nights rather than the 4th night), then you’d drop the 2016 numbers by about 25%. The adjusted Average benefit/use would then be $294. One “average” use per year would put us net positive on the Prestige. Two “average” uses would put us clearly in the black, before any other benefits are considered.
And, if we’re limited to 2 4NF uses per year, we’ll probably be able to pick the best ones. For example, if we were limited to 2 uses, we clearly would have chosen the one worth $629, and again, that one alone would made us net positive on the Prestige.
At this point, it’s probably worth mentioning some limitations of the Prestige 4NF benefit. We already mentioned that only the base room rate is reimbursed, not taxes and fees. There have also been times when we would have liked to use the 4NF benefit but couldn’t. Some examples – we couldn’t use 4NF:
- In conjunction with a negotiated American Bar Association (ABA) rate
- On Ritz-Carlton stays where we wanted to use a Club Level Upgrade and $100 property credit from our Ritz-Carlton Visa card (this has happened twice)
- At MGM properties on an Mlife preferred rate
It’s also not possible to use 4NF in other situations, such as in conjunction with Amex FHR (which sometimes has free-night benefits) or in connection with an Amex Offer (where you have to use an Amex card to pay. And of course 4-night points stays can’t qualify. There are only so many stays you’ll make in a year of 4 nights or longer, so it’s important to assess how many times the 4NF benefit can actually help you during a year.
For us, notwithstanding the increased earning categories, we’re saying that the changes to the Prestige card are an overall negative. The limitations on 4th-Night-Free benefit and the increase in the annual fee outweigh the increased bonus categories. And if we’re only going to be able to redeem TYPs for 1 cent per point on the Citi Travel portal, the changes become severely negative for us.
However, given the travel credit and the likelihood that we’ll use the 4NF benefit at least once and probably twice a year, it looks like the Prestige is still a keeper in a fairly close call.
What do you think about the changes to the Citi Prestige card? Net positive or net negative? WIll you keep the card or close it when your next annual fee comes due? Please let us know in the Comments!
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