Citibank Will Apply Your "No Interest Financing" Payments Anyway It Wants

Reader D has a Worst Company In America-themed success story. D writes:

The information on your website helped me get an error corrected with how Sears/Citibank credited my Sears credit card payments. Since you have Sears and Citibank going against each other today in your “worst company” tournament, I thought you might like to hear my story.

Late in 2006, I purchased a Sears appliance, using their “no payments, no interest for 12 months” plan. Then last December 2007, around the time I was to pay off the remaining balance (apx $500) from the 2006 purchase, I purchased a Sears Kenmore furnace, also with the 12 months no payments, no interest plan. This purchase could not be postponed; it was December, and I had to have a furnace. I asked at the time of purchase, and was assured that my future card payments would first be applied to the older purchase then to the new purchase after the old balance had been paid off.

A few days after my furnace was installed, I made a payment of $1000 on my Sears/Citibank credit card, which should have paid off the entire previous balance, and reduced the new balance on the furnace by about $500. But when I received my next bill, I saw that Citibank had applied only the minimum payment of about $25 to the old balance, charged me $21 in interest on the remaining old balance, and applied the remainder of the $1000 to the new purchase. I called the Citibank 1-800 customer service number, received an immediate acknowledgment that that didn’t look right, but the system wouldn’t let the customer service rep make the correction; I asked for and was connected with a supervisor who told me she couldn’t make the correction and that my “Citibank” agreement allows them apply payments as they seem fit. I asked for her supervisor and was told there was no one higher than her available, but she would set me up with a call back when someone was available. (That call never came.) I hung up and redialed the same 1-800 customer service number, thinking I might get a better response from whoever answered the second time. I got a customer service rep in Puerto Rico, who also acknowledged that the payments didn’t appear to be credited correctly, and he tried to correct the problem, but he too said the system wouldn’t let him do it. Then I used the Citibank CEO contact information from your site, and after a couple of unsuccessful attempts, I got through using the [*] key after accessing the company directory. I was ultimately referred to executive customer service, who politely, professionally told me that my account appeared to have been corrected after all, by the first rude, unhelpful supervisor. She said she would check the following day after the overnight postings, to make sure it was in fact corrected. Then I again got the lecture that Citibank can apply my payment any way they see fit. I’ve since received another bill, which shows that the correction was in fact made.

My problem with all of this:
1. The Sears “12 months no payment, no interest” promo is illusory if payments are applied first to the promo balance rather than the old balance on the account.
2. By applying only the minimum to the old balance each month for the next year, Citibank was set to make a killing off the interest they were charging me on the old balance.

If I didn’t get the payment corrected, I was prepared to pay off the entire balance, rather than pay interest to Citibank. This was a predatory tactic that would have cost me hundreds of dollars, literally, if I didn’t have the means to pay off the card immediately. I sure there are many people who are being victimized by this Citibank/Sears practice.

Ah-ha! As far as the bank is concerned, it can apply your payments whichever way it will benefit it most. Of course, Sears isn’t going to mention that when they sign you up for their “no interest” promotion.

This is the sort of thing that everyone should watch out for when taking advantage of “no interest, no payment” financing from retail stores. Be sure to read the fine print and don’t be afraid to stand up for yourself like reader D.

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