It appears that Citi-Bank customers are getting a rude awakening. Last year, Citi had a promotion to entice potential customers to open a new checking account. If you opened up a checking account you received 25,000 frequent flyer miles. That is not a bad deal until you receive a notice stating that you owe taxes on that “gift.”

So how could that happen? Are frequent flyer programs all of the sudden a taxable benefit? Fortunately, frequent flyer miles remain a non-taxable benefit as long as they are considered a rebate. A rebate, money you receive because you spent money, is not considered a taxable benefit. However, reward points are considered a taxable benefit.

Reward points are given to you when you take an action such as opening an account versus a rebate because you spend money.

To add insult to injury, Citi has placed a value of $625.00 on the 25,000 miles. It seems pretty excessive when the dollar equivalent for American Express points is $250.00.

Of course, Citi is not at fault. You can find the information regarding taxes buried in some vaguely worded fine print.

I think that I can speak for all of those brand new customers from Citi- “Thanks Citi Bank, for making a benefit not so beneficial”.

This is just another good example of the dangers of the fine print. It is vitally important to read all of the fine print before signing up for anything. A bank like Citi-Bank certainly is not going to do you a favor and point it out. After all, you might not want to open up an account.