Credit card proves too popular for its own good
Citibank and Cathay Pacific Airways have become victims of their own success. The popular co-branded credit card that their customers use to fulfil their free-mileage dreams will be terminated at the end of next month, after nine years of service.
The Citibank-Cathay Pacific Visa card is one of the most popular, if not the most popular card in town. It boasts more than 200,000 customers.
One of the few local credit cards to insist on no annual fee waiver, Lai See thinks it is a favourite with corporates for settling lunch bills. But popular as it seems, it only generates a thin margin for the card issuer.
The answer lies in its huge outstanding mileage credit, which has become a liability for Citibank. Assuming each card member spends an average of HK$10,000 per month at the existing conversion rate of HK$8 per air mile, Citibank would have to buy 3 billion miles a year from Cathay. As airfares rise, Citibank simply cannot offer a sweeter deal to satisfy Cathay.
Citibank last night began to send out letters notifying its customers that they should migrate to its PremierMiles Platinum Visa card, which provides four mileage programmes, including Asia Miles, and offers a three-month special conversion rate of HK$6 per air mile.