Citibank Card Users to Be Assured Best Price on Purchases

NEW YORK —  Responding to heightened competition, Citibank announced Monday that it would give refunds to its credit card members who use MasterCard and Visa to make purchases and later find the items advertised at a lower price.

Citibank, the nation’s biggest issuer of credit cards, said the “price protection” plan automatically will cover all 30 million of its cardholders.

The initiative comes as competition in the consumer credit card world has become increasingly fierce, particularly since AT&T;’s successful introduction of its Universal Master and Visa cards.

Industry executives said the Citibank move was an attempt to distinguish the bank’s cards from those of its rivals. But analysts predicted that other major card issuers, such as AT&T;, Sears and even American Express, may eventually match the Citibank enticement.

Under the plan, a consumer who uses a Citibank card to buy a product and within 60 days sees it advertised for less would be refunded the price difference by Citibank. Consumers may be reimbursed as much as $250 per item to a maximum of $1,000 per year.

There are restrictions, however. Cardholders must supply Citibank with both store and credit card receipts and must send in a printed ad listing the identical item at the lower price. The plan includes most items sold in stores except perishables. But it doesn’t include airline or any other type of tickets, services, or items for which a price is considered negotiable, such as art work, antiques, stamps and coins.

James L. Bailey, the Citibank executive in charge of the credit card division, declined in an interview to estimate the cost of the program, which will run through the end of the year. He said the bank hopes to recoup it by attracting new business and encouraging holders to use their cards more often and make bigger purchases.

The refund plan is the latest attempt by credit card issuers to drum up new business. American Express developed an extended warranty program in which cardholders are covered against loss if items bought with their cards are lost, stolen or destroyed. Most banks have matched that program, and some have developed other inducements.

For instance, Sears’ Discover Card offers its members 24-hour road assistance and a travel hot line and rebates of 1% of a customer’s total card charges.

Consumer organizations were skeptical about how much real benefit the price protection plans will offer. Gerri Detweiler, education coordinator for the Virginia-based Bankcard Holders of America, called the plans examples of the “bells and whistles” that card issuers are offering to lure customers.

“It has a lot of perceived value but not a lot of actual value,” she asserts.

She said it’s likely that relatively few consumers will be able to supply the required receipts and ads. And she said surveys showed that only about 3% of credit card holders ever use the enhancements on their cards.

Detweiler said the programs may distract cardholders from what she says is the biggest consumer problem with bank cards: the steep interest charged on credit card debt. Citibank charges 19.8%.

But Bailey said Citibank had done extensive customer research, including test-marketing in Sacramento and Fresno, and “consumers see it as more than just a gimmick.”

“We feel that today’s announcement was a reaction to what we’ve been doing,” said Bruce Reid, a spokesman for AT&T; Universal Card. He maintained that AT&T;’s entry into the market has spurred issuers to offer a variety of new services to customers.

The Citibank announcement also prompted speculation that consumers may be encouraged to buy more items in department stores, where service is better, than discount outlets, where prices may be lower. Such a trend could help deeply troubled department stores nationwide.

CITIBANK’S PRICE PROTECTION PROGRAM A Citibank credit card member uses the card to purchase an item at any store.

The cardholder can make a claim within 60 days that the item could have been purchased at a lower price elsewhere.

The claim must be documented by a printed advertisement and include store and credit card receipts from the purchase.

The claim is limited to $250 per purchase; an unlimited number of claims can be made for up to $1,000 a year per card member.

Once a claim is approved, credit for the amount will be placed in a card member’s account within two to three weeks.

There is no charge to cardholders for the service.

About 30 million holders of Visa and Mastercard credit cards issued by Citibank, covering about 18 million accounts, can use the program.

The program applies to most products, such as appliances, clothing, furniture and electronics.

It does not cover perishable items or negotiable-price items, such as coins, stamps, tickets to concerts, works of art or services. Nor does it honor limited-quantity, cash-only, going-out-of-business sales or close-out advertisements.

The program runs from April 1 to Dec. 31.

Source: Citibank