Citi Flex Plan is a service that lets Citi credit card holders tap into their line of credit in creative ways. With Citi Flex Pay, cardholders can split a large purchase into fixed monthly payments. With Citi Flex Loan, cardholders can borrow from their available credit and not get charged a cash advance fee.
Learn more how Flex Pay and Flex Loan work, and understand the pros and cons of each service.
[Read: Best Rewards Credit Cards.]
How Citi Flex Pay Works
Typically, if you make a purchase on your credit card, it gets added to your balance and you make monthly payments based on the total amount that you owe. Although you're only required to make minimum payments every month, you can pay more to reduce the amount of interest you owe or eliminate interest altogether.
With Citi Flex Pay, cardholders can separate purchases from their total balance and spread out the payment of those purchases over time in fixed installments.
"It can be helpful to pay off certain, likely large, purchases on your credit card over time on a fixed basis," says Gina DeCorla, senior research analyst at Curinos, which provides data intelligence to financial institutions, "as opposed to just paying the minimum amount because it reduces your credit utilization ratio."
The service is available for purchases of $75 or more. To use it, simply log in to your online account and select an eligible purchase that's marked with the Flex Pay icon. You'll be presented with a few payment options, including an interest rate and payment amount, and you can choose the one that works best for you.
Repayment terms can reach up to four years, depending on the item's price, and the annual percentage rate range is typically the same as your card's regular purchase APR range. So if your card's range is 13.99% to 23.99%, your Flex Pay APR options will also be in that range.
The payment on your Citi Flex Pay plan will be added to your account's minimum monthly payment. There are no fees associated with the plan other than a late fee if you don't pay on time.
You can also use Citi Flex Pay on Amazon purchases when you check out instead of waiting until the purchase has been posted to your account. Use your Citi card to make the purchase and choose the option to finance your purchase in equal installments.
Although there may be some differences, Citi Flex Pay works similarly to payment plans offered by other card issuers, including American Express Pay It Plan It and My Chase Plan.
Pros and Cons of Citi Flex Pay
There are some good reasons to consider using Citi Flex Pay on some of your larger purchases. Be sure to consider the downsides, too.
-- Your APR is fixed instead of variable, protecting you from potential rate increases on longer-term plans.
-- You face no separate application, credit check or monthly payment.
-- The plan can help you pay down the purchase faster as opposed to just making the minimum payment on your entire balance.
-- The APR won't be that much different from your card's regular purchase APR.
-- Not all purchases are eligible.
How Does Citi Flex Loan Work?
Citi Flex Loan allows cardholders to take out a cash loan from their credit card without counting it as a cash advance. As with Citi Flex Pay, you'll pay back your Citi Flex Loan in monthly installments and with a fixed APR.
Unlike a cash advance, there's no upfront fee associated with a Citi Flex Loan, though there is a late fee if you miss a payment.
"It's never really wise to borrow cash" through your credit card, says Alex Miller, founder and CEO of UpgradedPoints.com, a travel rewards website. Miller adds, though, that it's better if the transaction isn't counted as a cash advance.
You can borrow as little as $500, but the maximum loan amount will be based on your credit limit, creditworthiness and other factors. Repayment terms range from one to five years.
To get a Citi Flex Loan, you'll start by checking your account for an offer. If you're eligible to receive one, you'll choose a loan amount, then pick repayment terms from a list of available options. Next, you'll decide how you want to receive the funds -- options include a direct deposit or a paper check.
The monthly payment for your cash loan will be added to your minimum payment amount.
Pros and Cons of Citi Flex Loan
The chance to essentially get a cash advance without the drawbacks of one might sound appealing, but there are both advantages and disadvantages to using a Citi Flex Loan.
-- It's cheaper than requesting a cash advance.
-- You have no separate application, credit check or monthly payment.
-- Direct deposit funding can occur in as little as one business day.
-- Repayment terms last as long as 60 months.
-- The loan amount will reduce your available credit on the card, which can increase your utilization rate and damage your credit score.
-- You must receive an offer in order to be eligible -- you can't apply without one.
-- Loans are ineligible for rewards.
-- Citi doesn't disclose interest rates up front.
[Read: Best Debt Consolidation Loans.]
Alternatives to Using Citi Flex Plan
Whether you're considering using Citi Flex Pay on a particular purchase or you're thinking about getting a Citi Flex Loan, it's important to check yourself.
"In order to make the best use of fixed installment plans," says DeCorla, "customers must have good control of their spending and not make too many impulsive spends."
You may also consider using your credit cards only if you can pay your balance in full. "Paying your bill in full every month reduces your interest burden," says Miller. "The more interest that collects, the more you dig yourself deeper in a hole of debt."
That said, if you need cash, take some time to research alternatives that may offer a cheaper way to get financing compared with your credit card. Here are some potential options to consider:
-- 0% APR credit card. If you're planning to make a large purchase and want a little more flexibility to pay it off over time, consider using a 0% APR credit card. These cards charge no interest for a set period after you open your account, which can last as long as 20 months. As long as you pay at least the minimum every month and eliminate the balance before the promotional period ends, you won't pay any interest. Even if you still have a balance at the end of the promotional period, you'll only pay interest on what remains.
-- Balance transfer credit card. If you're thinking of using a Citi Flex Loan to pay off another credit card balance, a balance transfer card could be a cheaper option. Like a 0% APR card, a balance transfer card offers a 0% APR period, during which you can pay down your balance interest-free. Balance transfer cards typically charge an upfront fee of 3% to 5% of the transfer amount, so incorporate that charge into your calculations when you run the numbers.
-- Personal loan. If it's an installment loan you're looking for, a personal loan could be a cheaper option. According to the Federal Reserve, the average interest rate on a two-year personal loan is 9.58%, compared with an average of 16.3% on credit cards that assess interest.
There are a couple of things to keep in mind as you shop around for alternatives. With each of these options, you'll need to submit a separate credit application, which means an additional inquiry on your credit reports and separate monthly payments. Also, whether or not you qualify for a 0% APR credit card, a balance transfer credit card or a personal loan with a reasonable interest rate depends on your credit situation. If you don't have good or excellent credit, you may not qualify for another credit card, and your personal loan options may be too expensive.
As with any financial decision, it's important to review all of your options before you settle on one. And if you're thinking about applying for a different loan or credit card, check your credit score first to see where you stand and determine if you should work on improving your credit before you apply.