- Citigroup is launching a new digital checking account featuring unlimited free ATM withdrawals and fee reimbursements and interest rates of up to 1%, far higher than industry norms for checking accounts.
- It’s the latest salvo in the bank’s battle to win more digital deposits in its US consumer banking business. Last week Citi launched a partnership with Google to offer checking account services via the Google Pay app, another potential source of digital deposit growth.
- The 1% interest rate for the new Citi Elevate accounts only apply to customers with more than $25,000 in deposits.
- Deposits less than that amount but more than $10,000 earn 0.4% interest, while accounts with less than $10,000 earn 0.2% interest.
- The new offerings are only available to customers outside of the bank’s physical retail branch network.
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Citigroup is rolling out a new digital checking account aimed at luring new customers from outside of its branch network.
The hook: unlimited free ATM withdrawals and fee reimbursements, and interest rates of as much as 1% — a substantial payout in modern retail banking that far exceeds what most competitors offer.
The new product, called Citi Elevate, officially launched this week and is the latest salvo in the bank’s battle to win more digital deposits and kick-start revenues in its US consumer banking business.
Citi, which trails rivals like JPMorgan Chase, Wells Fargo, and Bank of America in deposits by a wide margin, rolled out a new strategy in February to boost growth by corralling new digital-banking customers outside the firm’s comparatively small brick-and-mortar footprint.
Consumers hunting for higher interest rates could park their cash with any variety of online high-yield savings accounts, though those tend to offer less flexibility to move money around regularly and withdraw cash without incurring fees.
“It’s using rate as a lure, but at the same time if you were solely about the rate you’d go to one of these online savings accounts,” Glenn Schorr, a senior banking research analyst at Evercore, told Business Insider.
“It just underscores the competitive intensity of retail banking and deposits in general,” he continued.
For eligible customers — it’s only available to those outside the six core markets that house Citi’s nearly 700 branches — the new Elevate offering could provide higher earning potential on the daily cash consumers have sitting in a checking account, though that will depend on how much they deposit.
Only customers who fund the account with more than $25,000 will earn a full 1% yield on their cash, gearing the product toward a wealthier clientele. Deposits less than that amount but more than $10,000 earn 0.4% interest, while accounts with less than $10,000 earn 0.2% interest.
Standard checking accounts typically offer customers little to no interest. The comparatively paltry 0.01% rate offered on a traditional Citi checking account — 100-times less than the maximum from the Elevate account — is commonplace throughout the industry.
Some online credit unions offer checking interest rates comparable to the top tier of Citi’s new offering, while Capital One and Charles Schwab have digital checking products comparable to Elevate’s lowest tier.
Citi’s deposit push
Citi’s grab for deposits has included launching a digital high-yield savings account with rates north of 2%, as well as an aggressive push to market bespoke checking and savings reward offers to the bank’s 28 million credit-card customers, a group Citi views as a potential goldmine since less than 10% of these customers have a broader banking relationship with the company.
These efforts helped Citi reap $4.7 billion in digital deposits through October this year, including $2 billion in the third quarter alone. That’s up from just $1.1 billion in digital deposits in all of 2018.
Last week the bank launched a partnership with Google to offer checking account services via the Google Pay app, another potential source of digital deposit growth.
In addition to growing deposits and Citi’s footprint outside its core branch network, the tiered interest perks Elevate offers could also provide a boost to the bank’s Citigold wealth management platform, which caters to clients with more than $200,000 in deposits or investments with the bank.
“It feels consistent with the general trend of Citi and others wanting to grow their wealth-management businesses and attract wealthier clients,” Schorr said.
Besides higher interest payments, the elimination of ATM fees could be a draw as well. Citi has a cross-country network of 65,000 ATMs, and it will also waive or reimburse fees Elevate customers incur from any non-Citi ATMs.
Such perks could conceivably put a dent in the division’s income in the event of an enthusiastic customer embrace, though Citi has hedged its bets.
The account comes with a $15 monthly maintenance fee, which is waived for those with more than $5,000 in deposits. It also requires electronic delivery of statements and other communications, cutting down on paper and other costs associated with traditional checking accounts.
“It’s a good perk to have, critical competitively, and probably not as expensive as it used to be because people are tapping ATMs less and using cards and mobile wallets more,” Schorr said.