Citigroup (NYSE: C) is entering the premium credit card market with its new Strata Elite card, a $595-a-year product designed to attract frequent travelers and high-end consumers. Targeting affluent clients—a market that is becoming more and more competitive for big American banks—is Citi’s most recent attempt to increase its footprint in consumer banking.
Citi Bank releases new credit card targeting affluent customers
The Strata Elite card, which will go on sale on Monday, will compete with the Sapphire Reserve and Platinum cards from JPMorgan Chase and American Express, which both provide upscale benefits and have even higher annual fees. Citi’s approach is indicative of a larger change in the banking sector, as banks are increasing their efforts to attract high-spending, low-risk clients while reducing their lending to lower-income borrowers.
“Some credit cards have gotten a little lost over time, and it’s a shame,” said Pam Habner, the head of U.S. branded cards at Citi. “Customers have told us that they’re busy and don’t want a coupon book of perks and benefits. We are going back to the core of what they want.”
Citi is providing a streamlined value proposition to draw in those clients. The Strata Elite card offers a $300 hotel credit, a $200 “splurge” credit that can be used at American Airlines, Best Buy, and other Citi partners, as well as high reward multipliers for categories like dining establishments and weekend food delivery. Citi is promoting the card as a simpler and easier way to use than rivals that demand a lot of work to fully utilize.
High fees balance luxury and value
Given the ongoing price increases for other premium cards, Citi feels that the $595 fee strikes the ideal balance between luxury and value. Analysts predict that American Express will increase the $695 annual fee on its Platinum card later this year, and the Chase Sapphire Reserve recently increased its fee from $550 to $795. “Pricing definitely has moved up over time, and people are willing to take on greater fees,” said Gonzalo Luchetti, personal banking head of the U.S. at Citi.
Wealthy clients are extremely valuable to banks because they are more likely to open new accounts, mortgages, or investment products, which increases cross-selling and long-term revenue. They are also less likely to default. A major component of Citi’s broader effort to strengthen ties with this market is its premium card strategy.
With the Strata Elite, Citi aims to capture market share in an industry dominated by established firms. Additionally, the bank is wagering that competitive pricing, targeted benefits, and simplicity will be sufficient to differentiate itself as the competition for affluent cardholders heats up.
Featured Image Credit: Julio Lopez; Pexels: Thank You!
