For years, Citi has had one of the worst cash back credit cards on the market. They are clearly looking to change that, with the introduction of the Citi Double Cash Card. This is a true no limit double cash back credit card if you pay on time.
How it works
When you make purchases, you will earn unlimited 1% cash back. If you make your payment on time, then you will double the cash back. So, you earn unlimited double cash back, so long as you make your payments on time.
There is no annual fee and no sign-on bonus.
How it stacks up
People have different strategies when it comes to earning cash back.
- One is enough! Some people want just one credit card, where they can earn a flat, high cash back rate. For those people, this card is likely the best choice on the market.
- Categories, please! Some people carry a few credit cards; so they can maximize their category spend. For example, they would use PenFed to earn 5% on gas, Amex to earn 6% on groceries, and Chase Freedom for 5% in bonus categories. In this strategy, you still need a card for any spend that is not in a bonus category. We believe this card is now the leading choice for non-bonus category spending.
There are two other cards with high base earn rates:
- Capital One Quicksilver: you earn 1.5% and have no annual fee. The math is clear: 2% beats 1.5%. The only difference is that you can earn a $100 sign-on bonus with Capital One. However, the higher earn rate beats the sign-on bonus quickly. If you spend $1,000 per month on your card, you would earn $180 of cash back at Capital One, compared to $240 at Citi. So, Year One would be better at Capital One. But Year Two and beyond would be much better at Citi. Citi is definitely the better card for the long run.
- Fidelity Investment Rewards Visa: you earn 2% cash back with no annual fee. However, the funds have to be deposited into a Fidelity account. There are two other reasons why Citi will win this battle:
- The Fidelity account is managed by FIA, a division of Bank of America. You will quickly see that the website looks like a dinosaur of the 1990s, and there is no mobile app. That was tolerable when only Fidelity paid 2%, but now that Citi is offering 2%, why deal with BofA service
- Fidelity has much stricter underwriting criteria, and your credit line is based upon the total assets under management. So, if you are a big Fidelity customer, then you will get a good credit line. But, if you open the Fidelity account just to get the credit card, you could be disappointed. Also, if your score is lower than 700, you will likely be rejected by Fidelity, but still have a chance at Citi.
We like that you can earn double cash back. We like no annual fee. And we would recommend this card. Just beware of three things:
- Very high interest rates: do not borrow on this card
- Foreign exchange fee of 3%: do not use this card overseas
- Always pay on time and in full to get the full 2% cash back value and not lose money in paying interest
However, you have to understand that Citi will not make money if people earn 2% cash back and pay back their balance in full every month. Citi is hoping that people do not pay back their balance in full every month. They want to earn interest.
And, you can expect that Citi will accept lower FICO scoring customers as well, in an effort to attract customers who revolve.
The interest rates are high on this credit card. If you don’t pay your balance in full every month, you will end up paying much more interest than the cash back that you earned.
Imagine you spend $5,000 for a big purchase on the card. You would earn an impressive $100 of cash back. However, the interest rates range from 13.99% to 23.99%. If you only pay the minimum due, then you would be charged $54 to $95 of interest in the first month alone! You can see that any cash back you earn would very rapidly be wiped out by interest that you pay. And that is what Citi is counting on.
We like this card a lot. Two percent unlimited cash back is a great deal. Just make sure you pay the balance in full every month.