It can’t be much fun to be a credit card marketer right now

The bosses are desperate for new revenue after a couple of years of writing off bad loans. President Barack Obama signed legislation making it more difficult to raise interest rates and impose fees.

Meanwhile, many customers are paying down high-interest debt and have sworn off the companies’ products in favor of debit cards. Oh, and they mostly hate that card companies cut many of their credit limits in a time of need and then reduced perks on some cards as if to rub salt in their wounds.

So now a couple of companies want to throw you a small bone. American Express said Friday that it will soon get rid of its dreaded currency conversion fees for transactions that begin outside of the United States, although only for people who have its Platinum or Centurion (aka Black) personal and small-business cards.

Two new Citigroup cards will also drop the fees. The new cards are part of an overhaul of much of Citigroup’s credit card operations. The company will discontinue a number of cards, including its PremierPass, Diamond Preferred Rewards, Simplicity Rewards, Home Rebate and Driver’s Edge Options cards. (The popular cards that earn American Airlines miles are not part of the changes.)

Starting early next year, Citi will replace these cards with one of four cards: ThankYou, ThankYou Preferred, Premier and Prestige. As part of the overhaul, Citi will take away some perks that many cardholders like and add others that weren’t there before. Many new customers will be paying strikingly higher annual fees than they may have paid for Citi’s discontinued cards (although at least for the moment, current customers won’t be affected).

Citi isn’t the only company making changes to its card lineup; most other issuers have been experimenting with new fees and rules for at least a year in an attempt to test the limits of the new card legislation and stop the bleeding in their card businesses.

Points calculus

Citi is a bit late to the game here. Then again, some of its new effort is built on a change it made in 2004.

That was when Citi introduced PremierPass cards. Users earned one point in Citi’s proprietary ThankYou program for every dollar they spent. Then, they redeemed those points for merchandise or free plane tickets on multiple airlines.

The twist was this: When you bought a plane ticket for yourself or others with the cards, you also earned separate “flight” points for every mile that you or they flew. Those points could add up quickly. So Citi wouldn’t let people redeem the flight points until they had an equal number of “purchase points,” which were all the ThankYou points people earned for every card purchase.

Because many people racked up flight points faster than purchase points, the not-yet-redeemable flight points turned into an anchor that kept many cardholders paying annual fees year after year.

For some affluent customers, this was such a bonanza that Citi had to repeatedly tweak the redemption rules for plane tickets in its ThankYou program. These changes served to keep the points from being so valuable that the program would become unsustainable. Today, you get a penny per point to spend on airline tickets when you redeem a ThankYou point.

And herein lies the challenge in analyzing a card like this, one that most consumers don’t think through. When card companies advertise double points or flight points or triple miles, it is utterly meaningless until you know exactly what those points or miles will buy.

This can be confusing. Really confusing. In fact, it’s confusing for Citi’s own employees, who included some language in the terms and conditions on its new cards that strongly suggested that the company was changing the earning rules for these flight points. In fact, the rules will remain the same.

Some of the other point-earning rules are changing, though. Many Citi customers now earn at least two points for every dollar they spend at gas stations and grocery and drug stores. With the new cards, that will fall to 1.2 points per dollar spent for the Premier card and 1.3 points for the Prestige one.

That said, customers can earn an unlimited number of points each year, and in most instances they won’t expire. Points on discontinued Citi cards are supposed to transfer to the new ones the company will send out in the first half of 2011.

Citi says it has no plans to further restrict redemptions. This is true until it isn’t, and as with any loyalty program, the rules can and will change.

New perks

On the Premier and Prestige cards, Citi is also throwing in some new perks. One that appears to be new to the card industry is a 15 percent discount on domestic plane tickets. You have to book through a Citi partner travel agent, and the terms and conditions for this benefit are rife with anxiety-producing bits about the partner determining the airline and routing, limited availability, airline participation (or lack thereof) and the possibility of earning no airline miles.

I tested the program for a New York-to-Chicago trip in February 2011 and found that the discount was real and that most airlines on the route participated. But I suspect that this will be much harder to use around Easter and Thanksgiving.

As for the new annual fees, they are aggressive. Two of the new cards have none, but the perks-laden Premier card has a $125 annual fee while the Prestige card requires $500.

Current PremierPass and other Citi customers who are paying lower annual fees will continue paying the existing fees for now. Despite my best efforts, I could not extract a promise from Terry O’Neil, Citi Cards executive vice president, that he would never raise them.

“There is no plan in place to increase annual fees for those customers,” was the best he would offer.

The company has also added annual fees for any and all supplemental cards, say for your spouse and children. New customers will pay $50 for each extra Premier card every year; Prestige cardholders will pay $175 for each authorized user. Why? The card and its benefits are worth it, O’Neil said. (Current card holders will not have to pay annual fees for their authorized users’ cards for now.)

Maybe they are and maybe they aren’t. Never has the phrase “your mileage may vary” been more appropriate than it is with Citi’s credit card reboot. So much depends on what, where and how you spend and which rules Citi changes in the future (and when).

The experts figure that consumers will be skeptical.

“I just don’t think that people will have a lot of confidence,” said Dennis Lefebvre, who moderates or co-moderates several credit card forums on FlyerTalk.com, where many of the savviest travelers and credit card users hang out and swap tips. “They have tinkered with the way you earn and redeem ThankYou points so many times over the last half dozen years that I think it’s very difficult for a person to make a decision to accumulate those points towards a spectacular reward that takes years to save for.”