It used to be acceptable to have a credit card that earns rewards worth 1% spending. These cards would routinely offer one hotel point, one frequent flier mile, or 1% cash back. Yet these days, a mere 1% is not a competitive return for a reward credit card. In fact, several of the major credit card issuers feature no-fee cards that feature 5% returns on select categories of purchases that change each quarter. Citi offers its Dividend Platinum Select Visa card that offers compelling perks, promotional financings, and 5% cash back bonus categories.
How this reward program works
Cardholders earn 1% cash back on all purchases, and 5% back on up $6,000 spent each year at categories of merchants that change each quarter. For example, in Q3 of 2013, cardholders earn 5% cash back at Hilton hotels, car rental agencies, movie theaters and theme parks. In addition, new cardholders receive $100 in cash back after making $500 in purchases within the first three months of opening an account.
How the financing offer works
New cardholders receive 12 months of interest free financing on both new purchases and balance transfers. Qualifying balance transfer must be made within four months of opening an account, and there is a 3% balance transfer fee. After the promotional financing terms expire, the standard APR will be 12.99%, 17.99%, or 22.99%, based on the cardholder’s creditworthiness at the time of the application.
Other card features
Citi also includes several other valuable perks with this card. An extended warranty program adds one year to the manufacturer’s coverage, while the purchase protection program reimburses cardholders for up to $1,000 in the event that their goods are lost due to fire, theft, or accidental breakage. When traveling, cardholders are protected by travel accident insurance, lost luggage coverage, and trip cancellation/trip insurance coverage. Finally, Citi’s Price Rewind offers automatic refunds any time a registered purchase experiences a price drop of at least $25.
There is no annual fee for this card, but there is a 3% foreign transaction fee added to all charges processed outside of the United States.
Is this card worth it?
This card is one of three very popular products with nearly identical terms. Like Citi’s Dividend Platinum Select, both the Chase Freedom and Discover it cards both offer 1% cash back on all purchases, and 5% rewards on merchants in bonus categories of merchants that change each quarter. While the Discover and Chase cards limit bonus cash back to the first $1,500 of eligible purchases each quarter, Citi limit’s bonus cash back to the first $6,000 of qualifying purchases each year, a clear advantage.
In addition, this card has a far greater slate of benefits than the Discover it or Chase Freedom cards. When cardholders can use features like purchase protection and Price Rewind, they are receiving added value not available from its competitors.
So the question then becomes, is this the right way to earn rewards? There is no doubt that 5% cash back is an excellent rate of return, but cardholders must resign themselves to noting which purchases are eligible for these rewards each quarter. Furthermore, cardholders must remember to register online for the bonus categories each quarter in order to activate them. Finally, there is a tendency for some cardholders to make unnecessary purchases in order to maximize the bonus categories of spending. In fact, the banks that issue these cards seem to be betting on it.
Cardholders who are looking for a no fee card with the chance to earn 5% cash back should strongly consider Citi’s Dividend Platinum Select. But if keeping track of which spending categories qualify for the bonus is unrealistic, or if you might be tempted to spend more to earn cash back, it is probably best to focus on cards that return the same levels of rewards throughout the year.