Earning Almost Unlimited Free Miles Churning Citibank Checking/Savings Accounts

I’ve made some oblique references (and soe less oblique ones, it was my #2 way to earn miles here) to earning miles by funding Citibank online checking and savings accounts with a credit card. Many times in the past I’ve been asked not to post about the deal by folks who were benefiting from it, the theory was that extra exposure was likely to kill it because the deal was just so good and not sustainable.

Citibank has been cracking down on many of the people taking uber advantage, and I suspect many of the folks who used to email me asking not to write about it are no longer able to use it themselves. Hence when I’ve written briefly about it on the blog here in the past few months I haven’t gotten such nastygrams.

And in fact there is now a thread on Flyertalk openly discussing the offer, and I’ve been a major contributor to that thread. There hasn’t been a pile-on of “please do not discuss this in the open or you’ll kill it” postings. Thus I’m pretty confident the only time banking churners have been put out to pasture by Citi. (Although I’m actually surprised that the thread hasn’t gotten more discussion than it has, considering how lucrative the technique actually is.)

Still, this is a great opportunity so I wasnted to describe it in greater depth for my readers while it’s still possible to take advantage of.

Several banks let you fund your initial deposit into an account opened online using a credit card. Usually they cap the amountof the deposit at $1000 or $2000. Citibank does not cap the amount of your initial deposit funded by a credit card. Thus your only limit is your credit limit.

They don’t accept American Express, only Visa and Mastercard. It doesn’t have to be a Citibank Visa or Mastercard, any will do.

They code the charge as a purchase, rather than a cash advance. This is crucial. Cash advances generally do not earn miles (or cash back, depending on the card), and come with hefty fees. They do warn on their funding form about the possibility of the charge being treated as a cash advance, so just to be 100% safe I set the cash advance limit of my credit card that I’m using to zero. And I print out online where it shows that cash advance limit as zero. That way if the coding of charges should ever change then the charge would simply be rejected. And in the extreme if it was accepted in spite of the limit being zero I have it in writing that it should not have been approved in order to argue later. But this has never been a problem.

So you open an online checking or savings account, and during the process there is an option to fund the account with a credit card. It’s kind of hidden, but they provide a form to fax in with your credit card information. (If you do not find the form, e-mail me and I can send it to you.) The form strangely does not have a place to fill in your newly opened account information, and this is necessary, so make sure to write it somewhere on the form. And then fax in the form.

Very large charges are sometimes flagged as potential fraud. Twice I’ve opened a Citi checking account using a Chase-issued credit card and my $50,000 deposit was flagged by their security group. I had to call Chase and tell them the charge was ok, and ask them to clear it. (Once it was flagged twice, and they had to give it the ‘highest priority’). Then I had to call Citi and ask them to run the charge again.

Once they run the charge, you earn the miles for the charge and you have a big deposit in your account. You then use the funds in that account to pay off your credit card.

If you’ve opened a Citi checking account, you can just write a check to your credit card company. But be aware that Citi requires you to activate your checks once you receive them otherwise the checks will be returned. Similarly, until you activeate your checks any payment initiated through your credit card company’s website may be rejected. Personally I get around waiting for the checks by just using Citi’s online billpay feature. They limit you to paying a single merchant $10,000 per day so I space the payments out $10,000 per day for several days, making sure to start this early enough that all the payments are in before the due date. Note that in the meantime if you sign up for an intereat-earning account you are earning interest on this free money. Some people even move the money out to a higher interest account in the meantime, but the short duration tends not to make it worth my trouble. I do tend to time my account openings so that the charge hits my credit card right after a billing cycle closes, in order to maximize the amount of time the free money sits in my account.

Bottom-line is rinse, repeat, and you earn a whole lot of miles. There are varying reports of whether Citi even pulls a credit report on customers when opening new online checking accounts, alhtough it’s hard to imagine that they do not.

How many times can you do this? Results vary. There are some people who have done it as many as ten times that I’m aware of, but Citi has finally started cracking down. Some people are being told “three times in a lifetime” while others space out their account openings and manage to open six or seven perhaps by flying under Citi’s radar. The number of times you can successfully do this is unclear.

Note that Citi accounts often come with fees if you do not maintain a sufficient balance. So you’ll want to close the account quickly rather than keeping it open, unless you’re going for an account opening bonus. The most recent Citi checking that I opened simply required two direct deposits per month in order to avoid fees. I decided to keep that account open, and I shoot over two $1 paypal transfers per month and that works for my direct deposits to avoid fees.

It is possible to have more than one Citi checking open at the same time, so you don’t even have to cancel.

Questions? Anything unclear? Ask away in the comments and I will do my best to answer. Consider getting in on this deal if you have a nice high credit limit on a cashback or mileage-earning Visa or Mastercard, who knows how long this opportunity will last before Citi cuts it out entirely or handicaps it further.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. How can the banks possibly afford this? Most businesses will accept some cost for new customer acquisition, but between the credit card merchant charges (2-3%), the interest, and the signup and bonus miles on the credit card side, it has to be very expensive to the bank.

    I am surprised the bank doesn’t have a more effective customer profitability analysis group that talks to their customer acquisition group, to avoid such losses.

  2. I’ve only tried funding a Citi checking or saving account with a Citibank CC. Does it work with Chase (purchase not cash back)? And does it work with BoA (former MBNA) credit cards?
    My concern was that using a Chase or BoA card might result in a cash advance charge.

  3. @AS, is this the poor bank argument? It’s not banks, it’s citibank. Most banks are “smart”. Maybe you missed the subprime housing scandal, they barely checked the income of loan applicants. Citi is very large and overall their CC business has been making profits. It’s all about growth.

  4. @Super, I’m not sure what you mean by “poor bank argument”.

    I don’t think there is that much parallel to the housing bubble. My views on the subprime housing scandal is that it involved many more parties – individuals, mortgage brokers, banks, rating agencies, Wall Street, mortgage [CDO/CMO] investors, and the Fed. They all fed off each other because it was profitable for them to do so, and until the music stopped, they were all posting strong profit growth. In my opinion, greed, more than anything else, drove the housing market off the cliff. Until then, they were very profitable, and only when the market stopped and loans came due, did the losses start showing up. But there was a 3-5 year lag time in many cases for those loans to go bad, during which time it looked like they were making money.

    I know it’s Citibank, and my point is I expected them to be smarter. But in the credit card / bank account arbitrage concept of this post, I just see the losses right away, what I don’t see is how each party (mainly Citi) profits while the scheme is ongoing. That’s why I wonder, since they don’t show profits short-term, how is it they are able to allow this to go on?

    Maybe, if I understand what you’re suggesting, is that they are using other metrics to evaluate: # of accounts, $ of outstanding balances, # of performing accounts, etc, and trends of these metrics, instead of focusing on customer / account profitability as I would have expected they should be?

  5. What is the advantage of leaving the checking account open? It seems like sending the payal payments would be a bit of a hassle.

  6. I’ve tried this w/ my Citi AAdvantage card as recently as last month. It didn’t go through because Citi sees that the charge comes from a financial institution, including their own. They will flip the code to cash advance. Their thinking is that you can’t buy anything at a financial institution. I went back and forth w/ both sides of Citi for a week on conference calls. In the end, I got 5,000 miles for my trouble but still no success.

    I tried w/ my Marriotte Rewards card from Chase and that went through just fine.

  7. @AS Says:
    “poor bank argument”. Sorry, ambiguous the argument isn’t poor, referred to poor=feeling sorry for

  8. Which mileage/cashback cards allow to set the cash advance limit to 0$? I called BofA CS and they don’t allow to set 0$ cashback limits or lock the cashback feature.

  9. So I’m a little unclear on this. Say I sign up for the AAdvantage Citibank card. Then I open a Citibank checking account with whatever the maximum credit limit is that they give me on the card–say, $20k. Then, I need to pay the credit card bill, so I use the money from the checking account–doesn’t that leave me with an inadequate amount to not get a fee if I use any of the checking accounts that yield interest? Or do you just take the last of the money out and say “I’m closing the account now” to avoid the fees?

    Then, if I want to repeat the whole process, I close out the checking account, cancel the credit card, and start the whole thing over again?

    Thanks for all the information–the topic is compelling. I hope to acquire enough acumen to start taking advantage of some of these deals soon!

  10. I had a lot of trouble doing this. I set it up, by US Bank cedit card was declined three times, becuase US Bank treated it as a chas advance. I was told by the Citi reps that some anks do this, because it is going to a bank, he mentioned Chase and Citi cards defaulted to cash advance, but based on your posting perhaps Chase works.

  11. I did this once and recall having to sign out of my existing citibank account and pretend I was a new customer in order to be able to fund with a credit card. Can anyone confirm if this is necessary?

  12. @Gary- I tried reducing my cash advance limit to zero, but was told no. The CSR said the cash advance is approx. 20% of your total credit line…

  13. I successfully funded Ultimate Savings Account with my Citicard. I plan to use money in that account to pay charge but am trying to figure how with least possible fuss. Can you do bill pay from savings account? I get a message saying payments can’t be made with any of the accounts linked to this card and to call. Also, is it necessary to keep minimum balance if account isn’t closed?

  14. I have done this about 13 times with Citi (7 under my name and 6 under my wife’s name). However, I have maxed out my lifetime allowed online opening of accounts. Are there any banks other than Citi that allow you to fund with a credit card and classify it as a purchase rather than a cash advance. As it is bank driven based upon the classification, in theory as long as the bank classifies it as a purchase it could work with any credit card and any bank. I could really use the miles.

  15. Gary – I have a quick question. I am planning to apply for chase united + chase business card on the same day. Once opened, I am planning to open a citi savings account. I have the follownig questions
    1. Will I be able to fund my citi account with chase cards?
    2. Will this count towards minimum balance spend for chase?

  16. @Diana you used to be able to fund Citi accounts with credit cards and have that count as mileage-earning, and not as a cash advance. I used to do it frequently 🙂 As much as $80k at a time. My impression is this is no longer possible in any meaningful way, though there may be occasional banks that let you do this for $1000 or $1500…

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