If your credit card issuer comes along and generously offers you an “upgrade” for an old credit card you have in your wallet, think twice. They may not be doing it out of the kindness of their heart.
Way back in 1985, if you can believe it, I applied for and received a card called the Citi ThankYou Preferred (no space in thank you, because spaces are apparently not cool). I don’t remember what it initially offered in terms of points, but it was never a particularly great card. But at some point, it began offering two points on restaurants and entertainment. The entertainment category was especially good, because it was interpreted very broadly.
Nonetheless, lately I began eyeing the Citi Double Cash card. Two points on dining and entertainment was fine, but obviously two points on everything would be better. So when Citi emailed me, offering to upgrade my dusty old ThankYou Preferred card to a shiny new Double Cash card, how could I say no? Especially because it had been announced that the cash back on the Double Cash card could be transferred to ThankYou points and used for travel. The Double Cash is a great companion to the Citi Premier card, which offers 3 points on gas, groceries, flights, dining, and hotels. Use the Premier for those categories, and the Double Cash for everything else, and you’ll earn enough points for a round trip, first class flight to Hawaii every year just with your normal spending. If you really want to squeeze out every point, you can create a Citi Card Trifecta by adding the Citi Rewards+ card, which rounds up every purchase to 10 points. Admittedly, kind of ridiculous. If you started every working day of the year with a $2 coffee, you’d only earn 2,200 points. But, what the heck; it’s better than the 880 points you’d earn without the Rewards+ card, and it also offers 10% points back for any points you redeem. Also good is the just released Citi Custom Cash, which gives you 5% on your number one spending category (of the ten available) each month, on up to $500 in purchases.**
Still, I waited before pulling the trigger, even though Citi was insistent, sending daily reminders that I had not yet upgraded. I finally clicked the upgrade button, and I swear not more than five minutes later, I received a message from Citi, thanking me for my years of loyalty, and advising me that my old ThankYou card was now going to receive 5% cash back on groceries for a limited time. No problem, I thought, even though I had agreed to upgrade, I still didn’t have the new card, so I’ll take advantage of the cash back on the groceries until the new card arrives.
Au contraire mon frère. The ThankYou card was already gone from from my Citi dashboard, replaced by the Double Cash card, even though I didn’t yet have it and hadn’t activated it. Still, I used the ThankYou card on my next trip to the grocery store, but the charge showed up on the Double Cash card.
But that’s not what torqued my lug nuts. The 5% cash back had some puny limit of like $50. Not much of a thank you, and no big loss. Oh, sorry, “ThankYou.” What burned my butt was when the Double Cash card finally did arrive, I checked the benefits, and many of the benefits my ThankYou card had provided were gone. No more extended warranty. No more Purchase Protection.
I probably save $500 per year on extended warranties just by getting them for free by making purchases on credit cards that offer them. And, yes, I have used them on a few occasions. I have terrible luck with inkjet printers, and I have been able to get my money back when they crapped out after a year.
I won’t make that mistake again.
I currently have another legacy Citi card that is no longer offered, called the Citi Driver’s Edge. I thought it was a great card when I got it. It offered 2% back on everything, which was pretty great at the time, and that 2% went into a savings account as it were, to be refunded back to you if you bought a car. And unlike similar credit cards currently being offered, it wasn’t tied to any particular car brand. It doesn’t even have to be a new car. New or used, just submit proof of purchase, and you get the money. I bought a $7,000 motorcycle and got $1,500 back, and later did the same with my wife’s Lexus. Pretty sweet.
But I was young and foolish and I hadn’t read the fine print. You could only earn $500 per year no matter how much you spent, and the money expired every three years, so you could never accumulate more than $1,500. I used it as the card for my business, thinking I’d be buying a new Lambo every couple of years with the accumulated funds, but I could not figure out why the “savings account” never seemed to grow, even though I was running so much money through the card.
I have no doubt that Citi will someday come along, singing its Siren’s song, trying to get me to “upgrade” my Driver’s Edge card to the latest and the greatest. But that old clunker (get the auto reference there?) offers two years extended warranty on purchases, and $10,000 purchase protection against theft or damage occurring in the first 90 days. No thanks Citi. If I want the latest and the greatest, I’ll just apply for it. As Roger Daltrey sings, “I won’t be fooled again.” Until Citi pries my Driver’s Edge card from my cold, dead fingers (or, less dramatically, simply cancels that card), I’m going to keep it for major purchases. I’ll still get 2% back, but with all the purchase protections as well.
And don’t forget the sign-up bonus.
Before you upgrade your credit card, make sure you are not giving up a generous sign-up bonus or other perk. In another case of an issuer trying to pull a fast one on me, I had a decades old Capital One “I Don’t Even Remember What it was Called” card, which offered no points or cash back. Capital One sent an email offering to upgrade it to the Quicksilver, which at least earns 1.5x. Nothing to write home about, but I used it on a trip to Iceland because it doesn’t charge foreign transaction fees.
But for people who apply for the card, it comes with a $150 sign-up bonus. People who upgrade are not eligible for the bonus. I made the informed decision not to care, because it was not a card I would ever apply for, so I wasn’t giving up anything, and I was getting a better card without a hard pull on my credit. But if you, say, upgraded from a Chase Freedom to a Chase Sapphire (just an example, I don’t know if they ever offer that upgrade), you would give up a 60,000 point sign up bonus.
And maybe two cards are better than one.
Also consider if there is some benefit to having the old card in conjunction with the new card. A real time example of this is the upcoming Chase Freedom Flex. On September 15, 2020, those who hold the Chase Freedom card will be invited to upgrade to the Chase Freedom Flex, which is clearly a better card, with the added benefits of 3% on dining and drug store purchases, and 5% on certain travel. You’d be crazy not to upgrade, right?
Not necessarily. Aside from giving up the $200 sign up bonus you’ll get if you apply separately for the Freedom Flex, if you keep both cards, you’ll double the cap on the rotating 5% categories. The quarterly categories come with a $1,500 cap on spending. Typically not a problem for most people, but around Christmas Chase sometimes offers a broad category like “department stores.” One 80″ television could blow through the $1,500 cap, but if you have both cards, you’d still be good to go for another $1,500 of 5% spending.
Don’t forget the interest rate.
Since I never carry a balance on my cards, the interest rate charged is not particularly relevant to my situation, but life can throw you curveballs, so I do keep the rates in mind, just in case. A WaveRunner could jump out of the bushes and force me to buy it. If you applied for the Double Cash card today, your interest rate would fall somewhere between 13.99% and 23.99%, depending on your credit and Citi’s largess. By doing a product switch, my interest rate stayed at 11.99%. I feel so special.
Bottom line: When you get an upgrade offer, take a moment to consider all the angles before pulling the trigger.
** Best use of the Citi Custom Cash
I touched on the Citi Custom Cash credit card. This is a great card for bonus points if used properly. Citi is betting that most will make it their primary card in order to get the 5% bonus, without applying any real strategy to their purchases. But if you use it for all your purchases, you’ll receive a paltry 1% on all but your 5% category. Instead, you should pick a category based on your spending habits, that will approach $500 each month. Use the card only for those purchases, and instead use a 2% card for other purchases, or cards that offer greater bonuses for other specific spending.
I am aware each time I write an article about credit card points that many find the idea of squeezing out every point to be silly. But it’s just a hobby. Also, it has real world consequences. As explained in my article about flying first class to Hawaii on credit card points, each leg of the trip costs 12,500 points. I have to squeeze out every point to get to 12,500. Otherwise, the airline drops me in the ocean partway there.
Here are the Custom Cash categories:
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Grocery stores.
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Restaurants.
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Gas stations.
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Streaming services.
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Drugstores.
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Home improvement stores.
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Fitness clubs.
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Select travel.
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Select transit.
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Live entertainment.
