Citigroup and AT&T Want To Give You Your Next iPhone For Free (Seriously)

Citigroup is aggressively trying to ramp up its credit card business in 2015, with several new co-branded products in the works. It was a huge victory for Citi when it swooped in and partnered withCostcoafter American Expresschose to end its partnership with the retailer. However, the bank's latest effort could truly prove to be a game-changer for the company.

The new credit cardCitigroup and AT&T are offering a new co-branded card, called the AT&T Access More card, that will allow consumers to get a brand new smartphone right away (or whenever they're ready).

Basically, once a consumer opens a new Access More card account, they will be provided with a unique link to a website where they can purchase a new smartphone at full price, which will be charged to their new card. Then, after spending $2,000 on the card within the first three months and maintaining service with AT&T, they will receive a statement credit for the full cost of the phone, up to $650.

The card also participates in the Citi ThankYou points program, and the earning rates will be rather generous, especially if the card is used for other AT&T purchases, such as paying the phone's bill. Points will be earned at the following rates:

  • 3 points for every $1 on products and services purchased directly from AT&T
  • 3 points for every $1 in purchases from online retail and travel sites
  • 1 point for every $1 on all other purchases
  • A 10,000 point bonus after $10,000 in annual spending

Additional benefits include a free FICO credit score and the ability to use Citi Wallet to make purchases. And the card could mean a great deal to both companies.

What it could mean for AT&TSince there is no similar credit card offered by its rivals, this is a good opportunity to convert some of the Sprintand Verizonfaithful who don't want to pay hundreds of dollars for a new phone but also don't want to be locked into a long-term contract. And since Sprint and Verizon combine for more than 160 million wireless customers, I'd say there is quite an opportunity here.

Citigroup could be the big winner hereEven though the new card is definitely a positive for AT&T, I think that Citigroup could be the biggest winner here. The credit card business has become extremely competitive over the past several years as consumer credit has loosened and banks are competing to offer the most enticing perks, but I think the Access More card could be a home run for two reasons.

First off, it's unique. There is simply no similar credit card product offered by rivals Sprint or Verizon, or any other mobile carriers for that matter. AT&T has more than 120 million wireless customers, and I'd be willing to bet that a large amount of them use credit cards regularly, since only 26% of American consumers don't have at least one credit card. And I'd also be willing to bet that a lot of those customers would like to get their next phone for free.

Second, the card is simply a great deal when compared with other rewards cards. The annual fee for the card will be $95, and the value of benefits received could greatly outweigh that. The phone benefit alone could be worth up to $650, and the ThankYou points earning rates I mentioned above are some of the best in the business -- even beating out the $450-annual-fee Citi Prestige card's earning rates.

Experts generally value ThankYou points at about one cent each (depending on who you ask), so even without the phone benefit it wouldn't be too difficult to earn enough points to make the card worthwhile. Including the free phone benefit, $10,000 in annual purchases could mean up to $950 in rewards from the card, a level matched by few (if any) other rewards cards in the business.

The real big winnersNow, I think this deal will provide a significant boost for both AT&T and Citigroup, but the real big winner here might be consumers. There has been a noticeable trend towards more and more enticing perk packages offered by credit card issuers, and the new product announcement by Citi confirms that the trend is alive and well.

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Matthew Frankel owns shares of American Express and AT&T.; The Motley Fool recommends American Express, Costco Wholesale, and Verizon Communications. The Motley Fool owns shares of Citigroup Inc and Costco Wholesale. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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