I use Citibank for just about all my financial needs.  My mortgage (on an apartment back in New York) is with Citi.  My home equity line (also on the NY apartment) is with Citi.  My checking an savings accounts are with Citi.  My brokerage account used to be with Citi, but I moved to Schwab last year for the lower trading fees.  And, of course, my student loans are with Citi.  Originally, only my law school loans (all $70,000 or so of them) were with Citi since my undergraduate loans (some $25,000 of those) were “direct” loans, but a few years ago I consolidated the direct loans over to Citi and locked in an historically low rate of 3.375% for 30 years (give me a couple of high inflation years and that fixed monthly payment will look really nice).

I wish I hadn’t.

I have never had a problem with any part of Citibank outside of their student loan department.  With student loans, however, it’s been one screw-up after another.  Two of my loans were not eligible for consolidation, and so their interest rates stayed variable.  As rates started climbing on those loans, I started sending in the occasional extra principal payment.  Without fail, Citi would screw up the extra payment.  They’d apply it to the next scheduled payment of interest instead of extra principal.  They’d apply it to a loan other than the one I specified.  If there was a way to screw up payment instructions, they found it.  It got to the point where I was sending the payments in together with an instruction letter whose key words (“additional principal” “loan #25″, and so forth) were typed in 20 point font and all caps.  Didn’t help.  Those idiots still screwed it up.

Yesterday, I received my year-end bonus and decided it was time to pay off the rest of the non-consolidation loans (I had about $4,000 remaining due on a loan with 7.25% interest).  I call.  The customer service rep gives me the payoff amount on the loan.  I tell her I’d like to pay it off.  She asks for my checking account routing and account numbers.  I ask what my monthly payment will be now that this loan is repaid.  She gives me a number that makes sense (my current monthly payment less the part that goes to this loan).  I thank her.  She thanks me back, and tell me that the payment will post by midnight that night.  Easy.  The whole thing took 5 minutes and I hung up with my faith in Citibank renewed.

Alas, it was not meant to be.  I logged in to my student loan account this afternoon to see that, wait, you’ll never guess: Citibank misapplied the payment.  Despite there being absolutely no confusion on the phone, and despite the specific discussion of a full pay-off of one particular loan, my payment was applied across all of my loans on a pro rata basis, meaning about $700 went to the loan with the 7.25% interest rate, and the other $3,300 or so went to the consolidation loans with the 3.375% interest rate.  Someone at Citi probably thought that MUST have been what I wanted.  Makes sense, after all.  Why would I want to pay off the higher rate loan first, when there’s a perfectly good loan going unpaid with its interest below the rate of inflation?

Moral of the story?  Don’t get your student loans through Citibank.  Their incompetence is just appalling.