The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Information on this website may not be current. This website may contain links to other third-party websites. Such links are only for the convenience of the reader, user or browser; we do not recommend or endorse the contents of any third-party sites. Readers of this website should contact their attorney, accountant or credit counselor to obtain advice with respect to their particular situation. No reader, user, or browser of this site should act or not act on the basis of information on this site. Always seek personal legal, financial or credit advice for your relevant jurisdiction. Only your individual attorney or advisor can provide assurances that the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, contributors, contributing firms, or their respective employers.
Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them. Compensation is not a factor in the substantive evaluation of any product.
Some credit card issuers are misleading consumers about the real cost of balance transfers and low-interest promotions, the Consumer Financial Protection Bureau announced Wednesday. The agency did not name any culprits, but issued a general bulletin alerting banks that they risk inviting an enforcement action if the deceptive marketing continues.
In its bulletin, the bureau said some card issuers fail to clearly explain that consumers who take advantage of low-rate periods for purchases or transfers risk paying higher rates if they fail to pay off the entire balance when the promotional period ends.
“Credit card offers that lure in consumers and then hit them with surprise charges are against the law,” said CFPB Director Richard Cordray. “Before they sign up, consumers need to understand the true cost of these promotions. Today, we are putting credit card companies on notice that we expect them to clearly disclose how these promotional offers apply to consumers so that they can make informed choices about their credit card use.”
This “gotcha” primarily affects consumers who normally pay their balances in full to avoid interest charges. With virtually all credit cards, carrying a balance of any type or amount means you lose the benefit of the grace period. So if you take advantage of a low-rate balance transfer but then charge additional purchases to the card, you will end up paying interest on those new purchases immediately, not once the balance of those additional purchases goes unpaid at the end of the month, like many cardholders who pay their bills in full every month expect.
The bulletin notes that some advertising materials don’t disclose the rate increases at all, while others fail to make the notice prominent enough, creating the “impression” that higher rates won’t apply.
“Some card issuers do not adequately convey in their marketing materials that a consumer who accepts such a promotional offer will lose his grace period on new purchases if he does not pay the entire statement balance, including the total amount subject to the promotional APR, by the payment due date,” the bulletin says.
Last year, the CFPB issued a report raising concerns that many consumers are still confused about the way banks calculate credit card interest.
The CFPB offered these tips for consumers:
Nessa Feddis, spokeswoman for the American Bankers Association, said regulatory compliance is of highest importance for the industry.
“Providing clear and transparent disclosures so our customers are fully informed is one of our industry’s top priorities,” Feddis said via email. “As the CFPB points out, federal regulations require – and banks ensure – that consumers receive four highlighted notices indicating they will lose the grace period on new purchases if they don’t pay their balance in full. This is true whether that balance is made up of purchases, cash advances or balance transfers.”
If you want to know if a balance transfer credit card is right for you, here’s a guide to when these cards make sense.
Image: razerbird
April 9, 2024
Credit Cards
October 21, 2020
Credit Cards
August 3, 2020
Credit Cards