The Consumer Financial Protection Bureau (CFPB) is warning credit card companies that using deceptive marketing to lure customers into promotional interest rates is against the law.
A release from the Bureau details concerns that some companies are advertising no interest credit cards or low interest credit cards to be used for specific purchases or balance transfers, but are not explaining that additional charges made outside the promotion are subject to interest fees.
By law, consumers need to be made aware of any charges they could incur. Marketing and promotional material that doesn't disclose this information violates the law.
According to the release, the problems are generally related to the marketing of credit card interest-rate offers such as balance transfers, deferred-interest offers, and convenience checks. Under these promotions, consumers are often charged a fee to transfer a balance or make a purchase with their credit card in order to receive a promotional interest rate on that amount for a set period of time.
While consumers pay no interest or a low interest rate for balances subject to the promotion, any additional purchases consumers make with the credit card may incur interest charges right away.
These marketing tactics specifically impact consumers who enjoy an interest-free "grace period" on their credit card purchases. The only way for these consumers to avoid interest charges on new purchases made with this credit card is to pay off their whole statement balance, including the promotional balance and the new purchases, by their monthly billing due date.
The CFPB recommends that consumers who do opt for a promotional rate, should avoid interest by paying the balance in full and make payments on time to avoid surprise charges. Customers should also compare the interest rate among their current credit cards and use the card with the lowest rate.
The full bulletin can be found here.