Citizens seize chance following Chase card decision
Citizens Bank Enters Premium Credit Card Market with Lower Fees
In the competitive landscape of premium fee-based credit cards, Citizens Bank has entered the fray with its Citi Strata Elite℠ Card. The card, which comes with a $595 annual fee, targets airline loyalists, particularly American Airlines customers, and aims to offer enhanced benefits without the hefty price tag of some competitors.
The move comes in response to JPMorgan Chase raising the annual fee for its Chase Sapphire Reserve card. Citizens Bank's timing for the relaunch of its credit card was coincidental but convenient, according to Adam Boyd, head of lending at Citizens Bank.
The Citi Strata Elite℠ Card offers tiered cash-back, with 3% on dining and groceries and 1.5% elsewhere, positioning it as a compelling solution in the digital landscape where customers can easily stitch together the best offerings from various providers.
Initial sales of Citizens' fee-based card have been better than expected, and the bank plans to capitalize on opportunities created by premium card competition intensifying. The credit card business is expected to serve as a growth accelerant to Citizens.
Citizens Bank has undergone a "soup-to-nuts overhaul" of its credit cards, including designing new products, investing in new origination technology, and enhancing the digital experience. The overhaul is a multi-year, multi-million-dollar investment.
One of the new cards is a new-to-credit product, part of Citizens' effort to attract younger consumers. Citizens Bank aims to deliver profits in line with a typical card business, around 3.5%, while investing appropriately for growth.
The credit card industry is experiencing a "gravitational pull" toward higher-end, fee-based cards. Citizens Bank believes it can offer a premium product at a lower fee due to not spending as much on marketing and introductory offers compared to larger competitors. The fee for Citizens' fee-based, metal card offering various travel and experience perks is $295 annually, or $95 if customers maintain a premium checking account at the bank.
Citizens' credit card business currently has about $2 billion in outstanding balances, and the bank aims to capture 7% to 10% of the $25 billion in balances outside Citizens over the next three to five years. The bank does not intend to use the card business as a loss leader.
Other major players in the premium credit card market include Chase Sapphire Reserve, American Express, Capital One, Bank of America, and Delta, all offering fee structures from roughly $395 to near $800 annually. These cards offer benefits increasingly tailored to travel enthusiasts and luxury-focused customers, with benefits such as travel credits, airport lounge access, elite status, and flexible point redemption.
[1] Source: CreditCards.com [2] Source: NerdWallet [3] Source: The Points Guy [4] Source: CNN Money [5] Source: Bankrate
- In the realm of business, technology plays a significant role in Citizens Bank's strategy for its revamped credit card business, as they invest heavily in new origination technology to improve the digital experience.
- Despite the competition in the premium finance segment from businesses like JPMorgan Chase, American Express, and Bank of America, Citizens Bank's Citi Strata Elite℠ Card offers a lower fee and attractive benefits, positioning it advantageously in the technology-driven market.
