How Would You Like To Sell Some Of Your Available Credit For Cash?

Citibank is giving some customers the chance to earn as much as $550 if they're willing to pay more than the minimum payment on their card, suspend use of the card for what appears to be about six to 11 months (depending on the offer), and agree to a credit-limit reduction that would amount to $3,300 if customers max out the $550 deal.

The deal, which is by invitation only, has been around since some time last year. However, I'm told that Citibank just recently sent out a batch of invitations to customers. Indeed, several of my readers have, in the past three days, received the offer from Citibank. Citibank, meanwhile, has several of these deals floating around. You'll recall that I pointed to a variation of this offer in February (see story here). The $550 offer, which is part of the "Citi Payment Partner Program," is the best deal that Citibank currently offers.

Here's how it works. Citibank will give customers a statement credit that's equal to 20% of the amount that's paid above the minimum. Therefore, if your minimum payment is $100 and you make a payment of $200, Citibank will give you a statement credit of $20 (20% of the $100 that you paid above the minimum). In order for a customer to earn all $550 he or she would have to pay $2,750 above the minimum over a three-month period (20% of $2,750 is $550). (Update: some readers have told me that some of the deals last even longer than 3 months; there are some 8-month payment plans available.)

One of the downsides to the offer, though, is that the customer's card will be suspended during the program-enrollment period. What's more, and this is an important detail that most customers seem to be missing, the card will remain suspended well beyond the three- to eight-month period when the customer is paying down the debt. The deal stipulates that the card will remain suspended until the actual earnings are credited to the account. How long might that take? According to the program offer, Citibank will credit the account within three billing cycles after the customer completes the program. Put another way, a customer could be without the card for some six to 11 months (again, depending on the offer that the customer receives). Customers who are interested in participating in the invitation-only deal have until May 15 to enroll in the program.

For some, the worst part of the deal involves the mandatory credit-limit reduction that the customer must agree to. When the customer finally receives the statement credit, Citibank will cut the customer's credit limit by the total amount that was paid over the minimum -- plus the statement credit. Therefore, if a customer pays $2,750 over the minimum, and earns the entire $550, Citibank will slash a customer's limit by $3,300. In some cases, that could leave a customer with a credit limit that's insignificant. And remember: $3,300 is the smallest hit that they'd take if they maxed out the offer. A customer who pays in excess of $2,750 will lose even more of the credit limit.

As if that wasn't enough, though, Citibank's fine print also reveals this little nugget: "Please note that removal from this program for any reason or voluntary withdrawal from this program will still result in a credit limit reduction as stated above." In other words, even if you don't complete the program -- and don't earn a statement credit -- Citibank will still be cutting your credit limit. You'll also forfeit all potential earnings. Make no mistake, by the way: this offer is part of a larger risk-reduction strategy by Citibank. The bank is looking to get paid and reduce further exposure (which is why it's cutting credit limits). Citibank, in other words, is sending a message to these customers. You're too risky for our tastes. This offer reminds me of the deal that American Express was pitching in February, when it was offering customers $300 if they'd pay off their balance and leave (link here). The Citibank offer isn't as severe, but it's similar enough.

So let's recap this offer. If you agree to participate, your account will be suspended for between six and 11 months. If you agree to participate, and decide to earn all $550, your credit limit will be reduced by at least $3,300. If you decide to withdraw from the program (by making a purchase -- even if it's a recurring payment -- during the enrollment period, for example), or you're booted from the program for any reason (a late payment will disqualify you), you'll forfeit all earnings and your credit limit will still be slashed by the amount that you've paid above the minimum.

So there you have it. I've laid out the facts, which will allow you to make an intelligent and informed decision. If you don't mind the credit-limit reduction and you don't mind losing the card for a long period of time, this offer, and the $550 in potential earnings, might be for you.