Is the updated Citi Prestige card worth it?

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Dear Cashing In,

I saw that the Citi Prestige card is undergoing a lot of changes. I looked online and it’s not available yet. In the past I always thought the annual fee was too expensive. But now, with the changes, I’m considering getting it. What do you think? – Morgan

Dear Morgan,

Card companies continually revamp their cards, tinkering with them to make them more appealing to potential customers and to make them financially sound for the issuer. It’s often a balancing act: They will make some changes that sound appealing while also removing some features that are too costly.

They then put some marketing muscle behind the new offering and call it an enhancement. That approach can be an easier sell than trying to hype the same old card that has been around for years.

See related:Updated Citi Prestige card now offers 5x points on dining an air travel

Citi Prestige: Old versus new

The Citi Prestige card is undergoing some big changes that affect most of the features of the card, including its annual fee, its reward structure and its redemption value.

Here are the features of the old card:

Citi Prestige – previous offer

• 3 points per dollar spent on hotels and air travel.
• 2 points per dollar spent on entertainment and dining.
• 1 point per dollar spent on general purchases.
• $250 annual credit on air travel.
• Annual fee: $450.
• Points worth 1.25 cents per point when redeemed for travel.
• Unlimited fourth night free at hotel when paying for first three nights

In late 2018, though, Citi announced some big changes to the card. The new Citi Prestige became available Jan. 4.

The new card has the following features:

Citi Prestige – updated offer

• 5 points per dollar spent on air travel and dining.
• 3 points per dollar spent on cruises and hotels.
• 2 points per dollar spent on entertainment (through 8/31/19, then 1 point per dollar).
• 1 point per dollar spent on general purchases.
• $250 annual credit on travel expenses.
• Annual fee: $495 (additionally, an authorized user fee of $75 will be implemented).
• Points worth 1 cent per point when redeemed for travel.
• Fourth night free at hotel when paying for first three nights – can use twice per year.
• Coverage against cellphone damage or theft when holder uses Citi Prestige card to pay their monthly cellphone bill – starting May 2019.

In brief, the changes mainly consist of hiking the annual fee by $45 a year, raising the points earned on air travel and dining to an attention-grabbing five points per dollar, making the $250 annual credit cover more travel expenses, reducing the redemption rate for travel bookings, capping the fourth free hotel night and adding coverage for cellphone damage or theft.

Updated Citi Prestige card rewards foodies, travelers

As with most credit cards, Citi Prestige will make sense for some people but not for others.

The main draw is the increase in points to five points per dollar spent on air travel and dining. That is more points than other cards aimed at diners, such as the Chase Sapphire Reserve (3x points), the Uber Visa Card (4x points), the Capital One Savor Cash Rewards Credit Card (4 percent cash back), and the Costco Anywhere Visa Card by Citi (3 percent cash back).

The earning rate on air travel is also unsurpassed. It matches the Platinum Card® from American Express, which also offers five points per dollar spent on air travel when booked directly with airlines or with American Express travel.

If you dine out a lot and travel frequently, this card might make some sense.

Even though the annual fee is rising, you can think of the $250 annual travel credit as chopping the annual fee in half, and if you can use the free hotel night feature even once a year, the card will pay for itself.

This rings especially true when you figure in all the miles earned from the healthy category bonuses on dining, air travel, cruises and hotels.

Pay attention to redemption changes, transfer partner limitations

However, when evaluating a new card, it is also important to consider how the reward points are redeemed.

By dropping the redemption rate on travel booked through Citi to 1 cent per point, Citi is making that travel more expensive.

A $500 hotel stay will still be worth 1,500 points, but instead of being worth $18.75 for travel on the existing card, those points are now worth just $15.

It’s not a big difference, but it’s important to point out that while the earning is better, the redemption is worse when booking travel through Citi.

You can also transfer Citi points to airlines, but do your homework there, too: Your options of transferring points are more limited with Citi than with similar programs such as Chase Ultimate Rewards or American Express Membership Rewards.

The only domestic airline you can transfer Citi points to is JetBlue, and there are no hotel partners.

There are ways to use Citi points to book travel on United, American and Delta, but you would have to do that through a foreign airline, and that can be complicated.

Overall, the new Citi Prestige card is a high-end card with a lot of perks. But make sure you understand the potential drawbacks when considering if the card is right for you.