Citibank credit card - out of cycle payment only applied to cleared retail transactions

tio on 18/01/2020 - 13:36
Last edited 18/01/2020 - 13:39

Hi,

Just want let people know about my recent experience with Citibank in terms of the way they handle credit card transactions and payments.

Background: I recently opened a credit card account with Citibank.

Day 1: I deposit $5000 into the account (account A)
Day 2: I made several purchases, totalling $5000 on account A
Day 3: I made a balance transfer (BT) request $13000 on the account A. At the time, BT was for 0% for 12 months.

What I expected: the initial $5000 deposited on day 1 gets applied towards the the transactions happened on day 2; and I left with just $13000 BT balance on the account at 0%pa.

Why I expected that: did it previously with ANZ, Westpac, NAB, Amex…and that's how it played out. Plus the gist of the current banking regulation: "payments have to go towards the credit card balance that attracting the highest interest rate"

What actually happened: the day 1 $5000 got applied towards the $13000 BT balance, brought it down to $8000. And the day 2 transactions started accumulated retail interest at ~20%pa, since day 3.

Citibank reasoning: Citibank system is set up so that, for payment made into a credit card account, the system only applies payments towards cleared transactions that attracting the highest interest rate. So, in my scenario, even if I had not requested the BT on day 3. I would still incurred retail interest on account A, for the period between day 2 and when the retail transactions cleared from account A, even if my credit card account is in credit throughout that period.

What about the regulation?: The actual wording (I haven't the excerpt with me at the moment) of the regulation includes "the closing balance" of a credit card account at the end of "billing cycle", so in effect, what Citibank is doing, isn't at odds with the regulation.

My verdict: dog act!

Financial

Related Stores

Citibank Australia
Citibank Australia

Comments

  • askme69 on 18/01/2020 - 14:10

    Same thing happened to me with Citibank maybe 12 yeara ago.

    BT of $15k for 15 months interest free ona BP card. They also had a promo of 50c off per lite of petrol for the first month. So filled up everybody i knew who had a car. Spent about $2k in petrol, paid the $2k qithin the 20 days and they took the payment off the BT amount and i was going to be charged 24% on the petrol.

    CANCELLED the card that day and paid all monies outstanding.

    I was told back then that the GOV were putting something in place so this is not allowed. Obviously didn't happen.

  • Meho2026 on 18/01/2020 - 14:32
    -1

    Oh Citibank are a bunch of c***ts and their customer service is a total nightmare to deal with.
    Its not just the Citi branded cards you have to watch out for either

    "In addition to its range of proprietary cards, Citi is also Australia’s largest provider of white label credit cards; providing its balance sheet to Bank of Queensland, Coles, Suncorp, Virgin Money, Qantas, RACQ Bank, IMB Bank, Auswide Bank and Kogan."

  • TomShugar on 18/01/2020 - 16:39
    +5

    Pretty sure this is the standard process across the entire banking sector, wouldn't matter if it's Citibank or any other.

    Purchased must be cleared, not in pending status, for any repayments to count toward them.

    If the purchases were cleared the repayment would have been attributed to them since repayments need to go to the highest interest debt first.

    I have had this happen before too. Very annoying, but hard lesson learnt.

    Citibank does seem to take a long time to clear purchases though.

    • tio on 18/01/2020 - 20:07

      Like I said, I went through the process in the past with other banks (non Citi) and none of them had issue like this.

      • jimbobaus on 19/01/2020 - 07:44
        +2

        Every single credit card I have works like this.
        Payments can’t be applied to pending transactions. Plain and simple. They all do it.

        • tio on 19/01/2020 - 21:11

          Interesting. I must have got lucky with my previous experience then.

  • HighAndDry on 18/01/2020 - 17:10

    Why would you start incurring interest from day 2? How come there's no interest free period?

    And of course payments only get applied to cleared transactions. Applying them to pending transactions would defeat the purpose of them being pending.

    • tio on 18/01/2020 - 20:08
      +1

      Not from day 2, but from day 3. As soon as you have a BT balance, you don't have any free interest period.

      • HighAndDry on 19/01/2020 - 20:48
        +1

        You don't have an interest free period for the balance transfer and until that's paid off (to $0).

        That's on you for not timing the transactions well enough then…

        • tio on 19/01/2020 - 21:09

          You are not wrong. But the issue is my account is $5000 in credit (balance = +$5000) on day 1. $5000 Spending happened on day 2. I thought the fact that the balance is +$5000 before spending, after the spending the balance would become $0. BT only happened on day 3. But obviously I thought wrong.

          • HighAndDry on 19/01/2020 - 21:20

            @tio: Yes, you needed to do the BT after the spending transaction was cleared and already paid off. I think you know that now though.

            • tio on 20/01/2020 - 23:36

              @HighAndDry: For Citibanks, yes, I know that now. I didn't have to wait for the retail transactions to be cleared with ANZ, Westpac or Nab.

  • Ryk on 18/01/2020 - 20:08
    +1

    The golden rule is to not apply for a BT on an account until you have confirmed a $0 balance exists, and then never use that account for purchases while carrying a BT balance.

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