NEW YORK -- Citibank plans to announce as early as today that it will guarantee people who shop with its card that they will pay the lowest available price.
Citibank, the world's largest issuer of credit cards, said the serv
ice would cover consumer electronics, furniture and clothing, but not air travel, art or antiques.
Goods bought at "going out of business," "limited quantity" and "cash only" sales, as well as at "close-out prices," are not covered, Citibank said.
The program requires the customer to make a claim within 60 days of the purchase and document that the goods could be bought at a lower price.
A cardholder who buys a videocassette recorder for $500, for example, and finds it sold elsewhere for a lower price, could claim a rebate of the price difference from Citibank.
Other banks that issue credit cards, as well as American Express Co., could well follow suit.
"This is a very major development," said Kurt T. Peters, editor of Credit Card News, an industry newsletter, when informed of Citibank's plans. "This is bound to set off a new wave of card enhancements by competitors who will follow Citibank's lead."
The last major innovation in the credit-card business was instituted in 1987 by American Express and quickly copied by Visa and Mastercard. Their programs provided expanded warranties for items bought with a credit card in the case of breakage, loss, theft or fire damage.
Credit-card issuers are resorting to such incentives because they have cards in the hands of nearly everyone who qualifies for one. Up to 90 percent of the eligible households have an American Express, Visa, Mastercard or Discover card, analysts say. More than 111 million people have one or more credit cards.
Last year, American consumers charged nearly $350 billion of goods and services on cards.
"This new program is very important to us," said James L. Bailey, the executive in charge of credit-card products at Citibank, a
unit of Citicorp, the nation's largest banking company.
The idea for Citibank's price-protection plan is not entirely new. Analysts say an Arizona bank, the Valley National Bank of Phoenix, pioneered the idea with its credit cards.
Also, Diner's Club, another Citicorp unit, has a similar service, except that it charges an additional $49 fee and the service applies only to specific stores.
Citibank has more than 30 million card members with Visa or Mastercards or both. The bank's cardholders charged more than $47 billion worth of products and services last year.
Under the new program, the amount credited on the consumer's credit-card bill can total up to $250 for a transaction, with a maximum of $1,000 for a year. The service will be offered without charge to Citibank holders of regular and gold cards.
In test-marketing last fall in Sacramento and Fresno, Calif., market researchers concluded that Citibank's price-protection program increased charge-card volume by about 5 percent.