Via Doctor of Credit, Citi appears to be changing its rules for welcoming back past cardmembers with a signup bonus.
You are now only eligible for the bonus if the card was not opened or closed in the past 24 months.
There appear to be a few card products showing the earlier 18 month language, which may not have been updated yet.
That’s an interesting change — they’re basically following Chase’s approach here (although not to the best of my knowledge also clamping down on approvals for the products themselves), and not going in the direction of American Express limiting customers to one bonus per card product in a lifetime.
Why do banks give out bonuses more than once?
Imagine a Citi AAdvantage cardmember who spends $30,000 a year on the card. She has an awful American flight, gets mad, and decides to cut up her card in protest, promising never to fly the airline again.
She keeps that promise for awhile, but finally relents and flies American. And realizes she really liked the perks of the card (like early boarding and free checked bags) and values her miles.
She sees an ad in American Way magazine and decides to sign up. She’s denied the bonus. Now she’s really mad. Why is a new cardmember, who never had a relationship with the bank, more valuable than she is — when she’s proven herself a loyal cardmember for years?
A customer who has shown loyalty to a product in the past is likely to be a better customer in the future, and a less expensive customer to acquire, than someone with no history with the card issuer. But that customer is told they’re less valuable than someone who has no history with the issuer.
But they don’t want to be too generous
Signup bonuses are expensive and only worthwhile to acquire customers who generate a certain level of revenue over a long period of time.
Naturally, some customers are gaming bonuses. When a card company is acquiring customers, they are acquiring good customers and also bad customers. What counts is the proportion — that the portfolio they’re acquiring is profitable. And it makes sense to try to optimize that, to make the portfolio even more profitable.
There’s a balance between not just wanting to hand out bonuses over and over, and attracting good cardmembers who are among a card company’s most likely pool of customers to bring onboard for a product.
Blunt instruments like “once in a lifetime” aren’t the way to do it, in my view. Instead, it would seem more effective to welcome back cardmembers who demonstrated profitability in the past, or have characteristics that make it reasonably likely they’ll be good customers in the future. I’m not sure tweaking 18 versus 24 months is a meaningful distinction here, but it’s a reasonable approach to test.
Since summer 2014 Chase’s generall approach has been to give a bonus again to people that do not currently have the card they’re applying for, and who have not received a bonus for that card in 24 months. Citibank now seems to be matching that.