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The Consumer Financial Protection Bureau (CFPB) sent out letters last year warning some credit card companies to be careful when marketing promotional credit card offers. The notification specifically addresses offers for low-interest or zero-interest balance transfers and convenience checks that can be used to take out a cash advance.
Although unrelated to low-interest products and marketing, the most recent example comes from Citibank. Citi sold add-on services between 2002-2013, promising payment flexibility and protection against fraud and identity theft.
Clear and Accurate Marketing
The federal agency has noticed that some card companies are at risk of breaking the law because of the way they market promotional rates. Under laws passed in the wake of the 2008 financial crisis, any credit card offer should be clear and accurate about explaining your obligations if you accept a promotional offer.
The marketing materials related to the offers have to present that information prominently; rather than burying it in small print or omitting it altogether. Some card issuers do not adequately convey in their marketing materials that a consumer who accepts a promotional offer may lose the grace period on new purchases unless the entire statement balance, including the total amount subject to the promotional APR, is paid off before the due date.
Understand the Grace Period
Most credit cards provide a grace period or a fixed amount of time before you are charged any interest on your purchases or other transactions. That means that as long as you pay off your entire balance before your statement due date, you will be within the grace period and won’t be charged any extra interest.
But failing to repay the whole balance by the due date will result in a loss of the grace period. Then you will be charged interest on your purchases from the date they are made. If you buy something at the beginning of the monthly billing cycle, for example, you can wind up being charged interest on it through the remainder of the month. Understanding credit card interest calculations (and when it kicks in) may be the most important aspect as a credit card owner.
Promotional Balances Can End Your Grace Period
Carrying a promotional balance can cause you to lose your grace period or make it more difficult for you to repay your entire balance in order to restore the grace period.
That’s why you have to be careful when you transfer a balance to your credit card. Even though it may provide you with an attractive interest rate to help you manage your debt; you could wind up paying the additional unexpected cost of interest charged on new purchases.
That fact can be disguised by attractive marketing and advertising materials so the consequences aren’t fully understood by consumers. That’s why the CFPB is now holding credit card companies accountable for complete transparency when marketing promotional offers and rates.
Interest Savings With Strings Attached
Some of the best promotional offers for balance transfers come with interest free payments for as long as 21 months. This is actually a really good deal and can be a valuable tool to help you reduce the amount of interest you owe, and help you pay off your credit card debt in a more comfortable and manageable way.
When consumers are not aware of how the rules of the offer work, however, they can wind up getting into more debt and paying more money in interest than if they had never performed a transfer in the first place. That compounds the problem they were hoping to solve and undermines their financial strategy.
How to File a Consumer Complaint
Should you have a complaint about your credit card company, you can file it online with the CFPB, by phone, fax, or snail mail.
- Visit consumerfinance.gov/complaint
- Call the toll-free phone number at 1-855-411-CFPB (2372) or TTY/TDD phone number at 1-855-729-CFPB (2372)
- Send a fax to 1-855-237-2392
- Mail a letter to: Consumer Financial Protection Bureau, P.O. Box 4503, Iowa City, Iowa 52244
Given the financial turmoil caused in 2008, the CFPB is doing its best to stay in front of all financial issues. They are more than willing to help and investigate any legitimate concern or complaint. Their primary goal is to give you greater power over your financial life.