The CFPB says consumers can be blindsided by unexpected charges after signing up for a credit card interest-rate promotion.
Sometimes those attractive credit card offers of reduced or 0 percent interest for a specific purchase or balance transfers aren’t as great as they appear to be.
The Consumer Financial Protection Bureau is warning credit card companies to tell the truth about their promotions and accurately disclose information in an easily understandable manner. In a statement, CFPB director Richard Cordray said:
Credit card offers that lure in consumers and then hit them with surprise charges are against the law. Before they sign up, consumers need to understand the true cost of these promotions.
Unfortunately, enticing offers sometimes carry unexpected risks. The New York Times said:
For instance, say you transfer a balance to a new card, or make a big purchase that comes with a zero or low-rate offer. If you then also make additional purchases with the new card, you’ll often pay the card’s full interest rate on the new charges, right away; there’s no “grace” period when you’re not charged interest, since you’re already carrying a balance on the card. (Grace periods generally are available for customers who pay their cards in full each month, instead of carrying a balance.)
The CFPB also issued a bulletin warning consumers that no- or low-interest offers often include a hefty, though not well disclosed, fee, such as 3 percent of the transferred amount.
“In some cases, the CFPB said, the fees and other charges can end up costing consumers more money than they believed they would save by going to a zero interest rate card,” CBS News said.
The CFPB offers these consumer tips:
- No balance. “Consumers that do not carry a balance can take advantage of promotional rates and avoid unexpected interest if they don’t make new purchases with the card until they pay off the entire balance,” the CFPB said. If you want to avoid paying interest on new purchases, pay with debit, cash or a different credit card that has a zero balance.
- On-time payments. If you want to avoid paying interest on a promotional 0 percent interest balance transfer, make sure you make your payments on time and pay off the balance before the promotional period ends.
We also strongly recommend that you read the fine print and understand it before you sign up for one of these cards.
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