Citibank Shutting Down Credit Card Accounts and Banning Customers

… and I say “meh.”

I’ve gotten several e-mails from readers in the past few days who have had their Citibank credit card accounts shut down.

Mostly this involves people who had signed up for Citibank credit cards that would earn 5 Thank You points per dollar on specific categories of spending, who then did large dollar volume purchases of gift cards and other financial instruments that could be turned back into cash.

Certainly I get that this wasn’t what Citi intended in offering the card with this benefit. And I wouldn’t have a problem with them ending the promotion early, or even ending it early for specific cardholders they feel are abusing the benefit.

They’re going too far, in my view, in that they seem to be (1) confiscating previously-earned points, and (2) even shutting down other credit cards held by the same individual. In some sense they’re firing the customers retroactively.

I’ve been vaguely aware of this, but hadn’t followed it closely. I hadn’t trumpeted the opportunity to earn 5 Thank You points per dollar on specific spend. Thank You points lost their luster for me in 2009 when they devalued (for the second time).

I’ve mentioned them a couple of times as a decent cash back card option, particularly when paired with the ability to double earning through flight miles — though only a handful of times as that’s not really my focus. I far prefer to spend and earn non-Citi Thank You points.

I’ve considered the Hilton card decent for Gold status, and the American card good for signup bonus (until they killed the 50,000 mile bonus a few days ago, at least, although a 40,000 mile bonus remains available).

So while I think Citi is behaving badly that’s also the Citi I know — and have known — for years.

  • They’ve devalued their Thank You points in the past with no notice. And when they’ve given notice of devaluation they’ve gone ahead and implemented changes a month early than they had said they would.

  • They’ve treated all sorts of things as cash advances that other issuers consider to be purchases, much to the surprise (and expense) of cardholders.

  • They’ve shut down checking accounts and banned customers for use of features (fund via credit card) offered by the program.

So I kind of shrug my shoulders and say of course Citi did this. But then I’ve been around long enough to have a memory for these things.

When readers have asked how to handle this, what they should do, all I’ve been able to offer is “do business with another bank.” Does anyone have a better strategy?

All that said, the way they seem to be doing this does appear to go quite a bit overboard. As I say, shut down the 5x earning they object to. Even decide that cardholders pursuing benefits from their card that way aren’t great customers to have in the future. But taking away earned benefits that were accrued in accordance with the program rules seems dishonest to me.

What is your experience as a Citi accountholder?

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. @RP: In 2008-ish, Amex FR’ed me as triggered by my manufactured spend. When they saw my annual income (hint: it was very low), they used that as the reason for shutting all my cards. I’m applied twice since and each time they’ve asked for the IRS form. Since my annual income has not risen significantly until 2012 (and I haven’t filed my taxes for that year yet), I haven’t bothered even submitting the IRS form allowing them to pull my taxes. I’ll apply again as soon as I get my 2012 taxes filed. They explicitly told me I wasn’t banned, just they didn’t feel comfortable extending credit to me ATM. (I felt it was a little hypocritical that they asked for my household income on the app–which I gave including my parents’ income because I lived at home at the time–but when it came to FR, they refused to consider that income.)

  2. Again, the angries come out and support the CC companies. Its almost laughable how bitter some people can be. “Pigs getting slaughtered” “too much” “abusive” all ridiculously vague and general. Waiting for someone to pop off with, “I cant describe “too much spend” but I’ll know it when I see it”. So much for our tight knit community of milers sticking together.

  3. Suddenly, being denied for the 5x Thank you card (first denial in many years) does not make me too sad.
    I feel for the ones affected.
    Stuff always happens in this game, this is just another development. Hang in there:-)

  4. Some interesting viewpoints here. I’m one of the folks who got all their Citi credit cards cancelled for buying gift cards.

    The folks using the cliché about “pigs being slaughtered” are naïve. The heavy users did fine: they’ve gotten hundreds of thousands of Thank You points and — aware of the risks — cashed them out. The folks who have gotten hurt here are the casual users who’ve bought occasional gift cards, didn’t see themselves as engaging in “risky” behavior and therefore kept reasonable balances in their Thank You account for future air travel. You didn’t have to buy many gift cards to be shut town, while other big spenders are still going strong. The shutdowns have been rather random, but have gotten more intense lately.

    I don’t think anyone buying gift cards and earning 5x was a saint, but the customers don’t set the rules — the banks do. Citi incentivized people to spend lots of money at gas stations, grocery stores and drugstores, and that’s exactly what they did. It’s wrong for a bank to say “go earn those bonus points,” but then shut them down if they earn more than the bank would like. Far better would be for the bank to set reasonable rules that everyone can live with (like cap the number of bonus points you can earn), or at least warn the gift card buyers that their spending is not “reasonable,” and cut off their future bonuses.

    There also seem to be some members of the “mileage community” who somehow see this gift card spending as a scam. To that, I would say that folks who live in glass houses should not throw stones. I think 99% of the folks reading this post have “bent” some “rule of propriety” with a credit card or travel related matter. Like did you sign up for a credit card only for the bonus and then put the card away? Wham — you just “stole” 50,000 miles from the bank. What about getting a credit card bonus offer twice, when the rules say one-time only? Or did you ever do a trick to hold an airline reservation that wasn’t 100% kosher, or use a car rental code for an organization you didn’t belong to?

    Everyone who travels uses “tricks” of some kind. Or at least they should. 🙂 As I said, there are no saints here, but the customers are way more in the right here than the bank. They played by the published rules; Citi did not.

  5. @HansGolden you know darned well that household income has a specific meaning, and doesn’t include your parents’ income even if you live with them 😉

  6. @Gary: Actually, I didn’t and don’t. In fact, I even recently saw a formal definition of it in current legal discussions because of the current legislative shifts: something along the lines of “that which you would reasonably have access to in order to repay the debt”. That was the case with my parents income: if I had defaulted on my debt, they would have probably paid it (and had me pay them back over time).

  7. Investopedia says this: “Household Income: The combined gross income of all the members of a household who are 15 years old and older. Individuals do not have to be related in any way to be considered members of the same household. Alternatively, household income is the combined income of all members of a household who jointly apply for credit. Household income is an important risk measure used by lenders for underwriting loans.”

  8. @HansGolden you provide a definition that requires it to be the income of household members jointly applying for credit — which is not the case when a child applies while living in the home of their parents. You’re also providing definitions of household income that relate to national income accounting statistics — aggregate economic data — not to credit card applications.

  9. Anything over what your household earns in a year is definitely too much spend.

  10. @Gary: So you’re saying that the household income metric should not combine a husband and wife’s income either? When have you *ever* applied for a CC jointly as co-signors?

  11. @Nick: You’ve obviously never run a business or had reimbursable business expenses.

  12. @ Andrew- I agree with you. Anyone here who lost a lot of points should be fighting for the points. The card doesn’t matter at this point. Your example of AMEX ring s true they use some common sense in these things. Chase and Citi, definitely not. This is a test to see how many people will fight. Calling it fraud to scare people

  13. Gary, that’s the reason the new law defines (IIRC) household income as “income reasonably understood to be accessible to repay the debt” because formally co-signing a CC is extremely rare.

  14. Gary, I certainly realize that I could be wrong in the sense that that is not what banks are looking for. However, I would be eager to hear a definition of what they are looking for. In any case, if household income is not actually household income, you should do a well-sourced, well-researched educational post on the topic. I’m sure I’m not the only one that had read “household income” at face value (and I can honestly say there was no knowledge on my part they might be wanting something other than actual household income, especially because it made so much sense: my risk of default was directly related to my household income, not my personal income).

  15. @iahphx I am with you especially the fact that Citi should have warned customers if they viewed that as a violation as a warning. Not doing that shows malice on their part. I don’t agree when you say somebody getting a card for the bonus and then not using it whatever. That is why some of the cards have min spend. Getting a bonus and not using a card breaks no terms etc. They hope you use it and carry a balance at 20%+. That is the trick.

  16. Talk about discussion hijacking. This important subject is not about how income is defined on apps or otherwise.

    People who just have to discuss some other topic should find an appropriate place to have that conversation.

  17. #61 @Nick a perfect example of the flawed logic of defining too much. My charges regularly extend past my earnings as I only keep a fraction of what I purchase as profit (my income). So my expenses always exceed my income and thats without any manu spend.

  18. After FTUDC, I was close to giving Citi my business again. Not too upset at the lost opportunity, they’re a bunch of wankers.

  19. Hopefully Chase won’t follow Citi’s lead and begin closing Ink cards and confiscating UR points because of giftcard purchases or manufactured spend.

  20. @robertw

    Actually, this is really no different than getting a card, meeting the bonus, putting it away, and then cancelling the card before the first annual fee. In both instances, you’ve broken no WRITTEN terms. In Citi’s eyes, you’re gaming the system and costing them money. It would not surprise me if someday they decide to ban churners. It would be a sad day, but it wouldn’t surprise me.

  21. Chase sells GCs on their website – and the ONLY way you can buy them is with a Chase GC. So the next time you get in a discussion with anyone at Chase, just bring that fact up. It shoots down all the nonsense that using a CC to buy GCs violates T&Cs.

  22. @Paul FYI Chase (like Citi) can and will make up any policy they want and apply it in any way. They could tell you that only their (chase gfs) can be bought as you mentioned or state the following: we closely monitor customer accounts and can review any such transactions. If you press them harder, they might claim bank regulations and the like.

  23. I should have been clearer, spend significantly exceeding income likely triggers an audit. It’s pretty easy to distinguish legitimate spend vs manufactured spend.

  24. There was never a commission paying affiliate link. Had there been, then despite your concern about citi, this card would have been pumped hard. The ability to create 5 cents per dollar of manufactured spend (4 cents net of costs) was tremendous….amongst the best offers this year.

  25. Who has abused the system more than the corporate-terrorist-banksters and other fraudster financial corporations (and executives) who commit crime after crime after crime, evade paying their share of taxes, got trillion$ in welfare…? And now, “record profits”?

    @craz + boraxo: yeah, the Nazis also had their willing, ardent supporters…

  26. @kalboz a few yrs ago I had a ton of coke points. forgot to add any for a while and then they cleared my account out. I started again and a few weeks ago the same thing happened. I emailed them and they restored the points :=)

  27. If I was a banker listening to HansGolden logic I would back date the closing of all his accounts and then make his Daddy sign for everything………seeing some of ages of the FFU there are a bunch others in the same demographic and same whine so good riddance to their bonus miles…….

  28. @Gary. I am among the customers whose TY accounts were locked then all cards closed with just a couple GCs purchases because Citi extended a retention bonus offer on 2 of my OLD Preferred cards from 2006 and2 2008. Citi confiscated hundreds of thousands of TYPs largely earned from 2009 on Premier card from our heavy travel that year, that I saved for future usage. A Citi rep called me on Thursday informed me the reason for account closure was due to “Fraud”. I did not commit “Fraud”. No where in any of the written T&Cs of the card, or the TY program rules says buying Gift Cards is considered committing “Fraud”. No mention anywhere that Citicard cannot be used to buy Gift Card. Never a warning notice to unwary customers that Citi does not allow gift card purchase with its cards.
    The “Fraud” is on Citi’s part because it advertises its products with deceiving practices and then use the undefined T&Cs to steal customers’ previously earned points.
    Filing complaints to government agencies now.

    I also want to point out I am not the person posted in the comment section of this article whose handle is Happy.

  29. Lets not forget that not everyone keeps or gets the CCs for Pts or Miles perse. Alot of folks get the bonus and then turn around and sell the pts or miles to Brokers.

    Theres even 1 site where theres a banner ad across the top of it. I believe the owner of that site has something to do with it. This way they make out on all ends, referrals from people getting the CCs via their links, and has some Mods that are the brokers

    Not everyone is interested in free flights or hotel rooms, they want the cash. Of cause the Brokers are selling the premium seats to those places where they can get the biggest profits and people post on MP & FT wondering why Award seats are so hard to find

    But during The Mint days when I went to a bank to use its coin machine, there was a guy already using it. Seems his CC paid him 1% cash back and he ordered the coins to make that $20 , which he felt was quick $$.I didnt bother educating him on getting the bonus sign ups.

    I have a friend who every time he gets a new CC and sells his miles/pts calls to tell me how dumb I amn for not selling mine. If he gets onto a plane once a year thats alot, he just wants his $$ ASAP. heck in certain NJ towns walk into a CVS or WM and if you have acertain look to you, they will tell you no GCs with CCs. 1 CVS ran out of VRs w/o having sold them.The people would go in take them off the hook and hide them around the store so that they could have a ready supply each day.

    Sure the CC issuers should have thought it all out, but when these things are being done can you blame them. tahts what killed many a promo once word gets out and people pig out, the goose will be slaughtered, usually by those who couldnt care if it is or isnt and their motto is get all you can before its no more

  30. I collected about 500K in points primarily paying taxes with the TYP card last year at 5% for 6 months. So I paid a bunch for those points at 2% plus fee, and then Citi can just turn around and confiscate them! And it sounds like redeeming the points for mortgage payment can be one of the triggers!

    They haven’t done it yet, but it sure is leaving me concerned! I may have bought a couple of VR’s using a Premier card on quarterly bonus, and also on Citi Dividend card for quarterly bonus as well.

  31. @flyingboat for now lay low. no more vrs or anything like that. If you have a need or way to spend the points, do so if you are concerned. I believe those that dispute will get the points back. I do know some others here with Citi might do the same. Seems that hoarding a lot of points does have some risk for sure. With AARP I kept spending them but I did not do any manufactured spend.

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