The Citibank 5X drama continues. More and more reports surface everyday of people who have had their Citibank credit card accounts suddenly terminated. The common thread seems to be ownership of a Citi ThankYou Preferred card that earns 5 points per dollar at gas stations, grocery stores, and drug stores for a limited time. People who have had their accounts terminated had used those cards to buy gift cards or reload cards. Citi has been closing all Citi cards held by those individuals, not just the ThankYou Preferred card; and Citi has been confiscating all ThankYou points, including those earned by other means.
One Flyertalker who goes by the handle “Happy” reported that when her Citi cards were closed and her ThankYou points confiscated, a Citi rep told her that buying gift cards was “fraud” (you can read Happy’s post here). If this is really Citibank’s position (vs. an ill-informed phone rep), then it is an extremely strange position to take. After all, gift cards are sold almost everywhere and often by banks themselves. If buying gift cards is fraud, then pretty much the whole world is committing it.
In reaction to this mess, soon to be attorney Paul Cook has setup a petition on change.org to try to force Citi to relent. I doubt the petition by itself will have its desired effect, but it will be very interesting to see what happens if news of these events and the petition reach national media outlets. What will Citi do then?
The downsides of being shut down
There are several negative aspects of getting shut down:
- Losing ThankYou points. If Citibank shuts down your accounts, they will confiscate all of your ThankYou points. They cannot take away miles earned on American Airlines cards or points earned on Hilton cards.
- Losing card benefits. Citi’s American Airlines cards have several great benefits such as free checked bags, priority boarding, and 10% rebates on awards. And, the Citi Hilton Reserve card offers automatic Hilton Gold status. As a cardholder, I wouldn’t want to lose any of those benefits (but losing them wouldn’t be the end of the world either).
- Missing out on sign up bonuses. After Citibank shuts you down, you probably won’t be eligible for new Citibank cards (at least, not for a long time). I don’t see this as a huge loss, though, since most great offers these days come from Chase, American Express, and Barclaycard.
- Credit report consequences. If Citibank closes your accounts, your credit report will show that your cards were closed by the issuer. This may or may not be a problem, but it may be something you would have to explain some day when applying for a mortgage, for example.
ThankYou card options
Many readers who have the now seemingly toxic ThankYou Preferred card have asked me what they should do. I don’t know what the right approach is for you (or for anyone), but here are some options:
Buy and pray: Some have said that they’ll continue buying gift cards and saving up ThankYou points for when they’re most needed. This is the riskiest approach.
Buy and burn: Another approach is to keep buying gift cards, but to also spend your ThankYou points as soon as you get them. That way your total loss will be minimized if you get shut down. One challenge here is that cashing out ThankYou points by using them to make mortgage or student loan payments seems to be one of the triggers that cause shut downs. So, use the points to pay for flights or to get gift cards instead. A good option, for example, is to redeem for Sunoco gift cards at 1 cent value per point.
Buy cautiously: Another approach is to keep using the ThankYou card for regular purchases, but to stop buying gift cards altogether. With this option, you can play it safe and cash out your points each month or you could take a chance and keep your points for someday.
Burn, cut and run: Some people don’t want to risk having Citi cancel their accounts so have chosen to close their own accounts first. So, the approach here is to cash out all of your ThankYou points and then cancel your cards before Citi does it for you. If you go with this approach and you have more than one Citi card, its an open question as to whether you should cancel all of your cards or just the ThankYou card.
Cut and run: Another option is to cancel your card(s) without first cashing out your ThankYou points. This way there is far less risk of Citi cancelling your account before you do.
What to do?
Personally, I plan to buy cautiously (i.e. I will stop buying gift cards) and I’ll use my ThankYou points only when I need them to pay for flights (which I do frequently). If I get shut down, I’ll write about and no-doubt I’ll be upset, but I’ll get over it. Citibank needs customers, but I don’t need Citibank.
How about you, what will you do?