I know this is an old question, but I see the same questions over and over again concerning "what will be paid first" when dealing with a flex loan vs natural balance. I had a little difficulty dealing with this myself because I wanted to pay off the natural purchases before it hits the statement before paying the Flex Pay or Flex Loan balance. That way I don't pay interest on the new purchases, right? It doesn't quite work that way, but it's close. If you make a payment before the statement, then new purchases are not yet recognized to be paid before the loan and it will go to the loan.
Here's the trick: I found that I needed to wait until the new purchases hit the next statement. CITI DOES NOT CHARGE INTEREST FOR THE FIRST 30 DAYS AFTER A NEW PURCHASE GOES ON A STATEMENT AND THERE IS NO PAYMENT DUE ON IT AT THIS TIME. Once it's recognized on the statement, I can pay the minimum (which is just the loan payment if there were not leftover charges from the previous statement) and pay more towards the standard balance. Citi will automatically push overpayments to the highest interest rate balance first, which in this case would be the new purchases. This does show the total balance from both sources on my credit report, but it allows for paying towards the "other" purchases first and it will drop back down on the next one.
If you are already carrying a balance on your card that is recognized on your last statement, you CAN take the loan and pay the original balance with it. I've done it a few times for major purchases where I wanted to get the lower interest rate while paying for it, but also the miles for the purchase. (No miles or points are earned from a flex loan.) The Flex Pay option, as opposed to Flex Loan, works the same way for payments, but I would end up paying more that way.
