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Citi Cards Payment Partner Program Gives One More Reason To Try 0% APR Balance Transfer

Contributed by mm | March 14, 2007 9:19 PM PST

I am either the best customer of Citibank, or the worst, or both.

You might have learned from Wall Street Journal that big sharks like hedge funds are running the carry trades by borrowing Japanese Yen at almost-zero interest and investing outside of the island country with much higher returns. Similarly, if you regularly read this little blog, you already know from the monthly reviews that your hard-working blogger is also engaging in another type of mini carry trade -- by borrowing at 0% APR from credit card companies, and parking the proceeds to high yield money market accounts that regularly turns in 5% or more a year. At the end of February, I owe a total of $50,000 to three banks. And the most generous? Citibank, which was kind enough to issue two new cards to our family last year, and offered 0% APR balance transfer deals for a total of $36,000.

On the balance, my credit score took a nosedive last summer when I was in the applying-for-new-card-and-get-the-free-money spree, dropping from 720s to 660s in three months. It hasn't improved since, and surely, with a high credit utilization ratio, and barely paying the minimal due, I must be classified as a credit risk by most of my creditors.

Now you never know how life will treat you next. Upon arriving in Seattle earlier this week, I fetched my postal mails and dug out two identical mails from Citi Cards (on two of my cards with balance from 0% APR transfer):

How would you like to be rewarded your credit card company for practicing good credit habits? Now your Citi Card does just that. Introducing the Citi Cards Payment Partner Program. For the next 4 months, we will match 10% of the on-time payment you make over the Minimal Amount Due on your Citi Card account. At the end of the program, we will credit your account with everything you've earned - up to $550. In addition, to help you reach a lower, healthier balance sooner, the ability to charge on your account will be temporarily suspended during the program. Your credit line will also be decreased, so you can manage your account more easily. Please see the back of this letter for more details.

In the illustrative example in the same letter, the math works this way: if your Minimum Amount Due is $100, and you pay $400, you will receive ($400 - $100) * 10% = $30 statement credit for the month. And if you do this repeatedly for four months, you will get a total of $120.

Apparently, the sub-prime mortgage meltdown took a hair cut of Citibank's risk tolerance. So, in this era of financial uncertainty, Citi is more willing to give me, a pseudo sub-prime borrower, enough incentive to unwind the 0% APR carry trade in order to avoid possible delinquency. Nice try!

And you bet I took the time to give two calls to Citi to sign up for this fabulous offer. It is a no-brainer that by paying $11,000 more three months to one-year earlier, I can receive $1,100 in quick cash. It couldn't be much better than that.

P.S. On the technical side, you will have to provide a 10-digit invitation number from the letter to get accepted though, so if you don't have the letter, you might need to work harder to let Citi see you as a credit risk before Citi is willing to give you such last-resort deal. I assume Citi is looking for high balance compared to credit limit, bare minimal monthly payment, and low credit score. Good luck!

This Post Has Received 17 Comments. Share Your Opinions Too.

pfodyssey Commented on March 14, 2007

I love it...really. Hilarious.

tiwiw Commented on March 15, 2007

Did you mention that the "rewards" will be capped at $550?

Chris Hynes Commented on March 15, 2007

I got this too. You can't beat that -- getting >5% on a BT + 10% for paying it back... an easy 15% for just sitting on your ass and clicking a few buttons.

Harry Commented on March 15, 2007

for tiwiw, MM has TWO citi cards, which will end up of 1100 for him.

Great deal!

And when your credit score recover after you pay off the total, you can get other 0% APR deals!

skow Commented on March 15, 2007

I too am playing the 0% arbitrage CC game. Citi must view me as even more 'sub-prime'. (I have never missed a payment with any creditor) I got two of these letters about a month ago. Each letter gave a 20% match (instead of a 10%) for payments over the minimum, up to $550 for each offer. I signed up for the plans and expect to get $550 credited to each of my accounts in June.

Something about this just seems to good to be true:

1) Borrow money for free.

2) Make interest off free borrowed money.

3) Earn $1100 dollars for paying back money I fully intended to payback when the 0% expired

Brilliant! I couldn't have guessed it would have turned out this good. I just hope Citi doesn't blacklist me for easy credit in the future.

pustak Commented on March 18, 2007

I just have general question. You mentioned that when you visited Seattle this week, you collected your postal mail. Do you maintain an address at Seattle even though you live in China? Or do you just keep a PO box to receive all your mails. I am curious since I am planning to be a non-resident myself.


MM Commented on March 18, 2007

Pustak, go for a mailbox from UPS Store where you can kep a street address. More informaton in this post.

John Commented on March 18, 2007

CapitalOne is my most generous creditor, at $57k or 37% of total. I have one Citibank line... but perhaps they don't recruit me because i use the existing line as xfer target. I recently saw my FICO (or Plus score, whatever, same difference) and it was 750. So I'm not experiencing significant credit score loss (not that it matters to me... earn cash, pay points... which one buys a cheeseburger?) My overall debt-to-credit ratio is 40%. So oweing $70k presented no yellow flags to Mr. FICO. CapOne made huge grants just as the rest dried up, thinking perhaps that the last to expire has the biggest odds of turning a profit. they're just jockeying to be the one that capitalizes most on those of us who fail.

it would be naive to think they don't know what's going on. however, they are limited by the limited information presented within credit reports. for example, rate on debt is probably a trade secret, even while sharing it could reveal the "deadbeats" like you and me. so long as we're a small part of the pie, that's ok. though there aren't many of us, our comfort with big numbers must put us on the radar. we're "empty calories" to the industry. how could they not want to single us out and trim our profits?

i spoke with a veteran rep who said the feeless xfers are history, at least at her company. my last one runs out nov '07. i haven't been offered since November. other people seem to experience solicitations on entirely different timelines.

during recent Congressional testamony, the industry reminded us how new this "convenience" of easy consumer credit is. we should remember that the industry goes through aggressive customer aquisition phases, where they sink costs into unfavorable loans to gain market share. this is probably another huge factor in the patterns we experience. i get the feeling we've entered a new phase. not sure how this new program from citi fits in.

James Commented on March 22, 2007

Dude, PFBlogger,

Why not just save money and invest that? Why borrow the money? Its always seems like there are strings attached, even at 0 percent interest.



lee Commented on March 26, 2007

I don't understand. On the application on the Citi site, it says the 0% rate is not for cash advances. So how do you get the money?

riskpreferrer Commented on April 10, 2007

My wife got this same offer. We had taken advantage of 3.99% until the account is paid off. The spread between 5% money markets and 3.99% was not all that attractive, but the convenience of not having to worry about transfers was. However, when they offer 10 years worth of spread all at once, that's too hard to resist, particularly since short term rates could decrease. Interestingly, even as they make us this "Payment Partner" offer, they are offering a balance transfer at 6.9% until account paid in full. We won't take that one.

Michael Halls-Moore Commented on April 12, 2007

I'm wondering how long it will take before the credit card companies wise up to this kind of "arbitrage". It's all good stuff though for the moment!

Let us all know how you get on with it!

magicac Commented on May 3, 2007

This is a little bit of an extreme case, however here is what I did to make a couple hundred thousands of dollars with little effort and plenty of luck:

* Borrowed money with low interest rates through credit cards balance transfers, credit union loans, and other types of personal loans. This happens during years 2000 - 2002.

* Converted the money to TL (Turkish Lira) and reinvested in Turkish government bonds. I am a Turkish citizen therefore have legal advantages in terms of taxation, etc...

* Over the past 6-7 years, the government bonds have returned a combined interest rate of 400% - 500%.

* During the same period, the TL vs dollar parity has improved from 1.7 TL per dollar to 1.35 TL per dollar (another 25% gain).

* I repayed the money I had borrowed from two Citibank managed credit cards using the payment partner program (a small, however easy $1100 profit).

After the transactions listed above, if I convert the TL currency in my investments back to dollars, my net worth will have increased by > $450000.

The money borrowed from Citibank cards was close to $20k. That money increased to over $100k while after the payment partner deal, I had to pay back less than $20k to Citibank.

Note: The risk for buying government bonds is virtually zero, since your investment is guaranteed by the government.

Note 2: If you are tech savvy, transferring money between accounts and borders is quite simple using online accounts/transactions.

ASAP Credit Card Commented on May 10, 2007

Although the credit card companies have been trying to 'curb' consumers from taking advantage of 0% APR credit cards (with balance transfer and cash advance fees), there's still loop holes available for savvy individuals-- as you've illustrated. KEEP UP THE GOOD WORK!

ASAP Credit Card Commented on May 10, 2007

Although the credit card companies have been trying to 'curb' consumers from taking advantage of 0% APR credit cards (with balance transfer and cash advance fees), there's still loop holes available for savvy individuals-- as you've illustrated. KEEP UP THE GOOD WORK!

Toni Smart Commented on August 20, 2007

One's first step in wisdom is to kuesteon everything - and one's last is to come to terms with everything.

Jeffery Demeritt Commented on October 9, 2007

I think this one doesn't make any sense: breungles, mentioned somewhere

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