Question of the Day: What’s The Catch With 0% APR Credit Card Offers?

Sep 05, 2014

CFPB out with warning about deceptive credit card practices this week.  Rather than have your students eyes glaze over, I leave their bulletin to the end of this post.

Here’s another way to get at the issue in a more engaging manner.  Show the students this print ad and while it is projected in front of the class, ask them “What’s The Catch?”:

Give students a few minutes to come up with questions they have after looking at this ad.  Here is a sampling of questions they might have:

  • How long does the 0% APR offer last for?
  • What is my interest rate after the introductory period?
  • What if I can’t pay my full balance by the end of the introductory period?
    • This is where the CFPB bulletin believes consumer disclosure is weak.
  • Where can I qualify for this 5% Cashback bonus (what stores)?
  • Is there a maximum I can earn on the 5% Cashback Bonus?
  • Is it likely that I will be approved for this card?


(WARNING:  Legalese and bureaucratic speak follows, I can see students eyes glazing over already!):

“The Consumer Financial Protection Bureau (CFPB or Bureau) is issuing this Bulletin to inform credit card issuers of the risk of engaging in deceptive and/or abusive acts and practices1 in connection with solicitations that offer a promotional annual percentage rate (APR) on a particular transaction over a defined period of time. These transactions include, but are not limited to, convenience checks, deferred interest/promotional interest rate purchases, and balance transfers.

The Bureau has observed that certain solicitations for these types of offers risk being deceptive if the marketing materials do not clearly and prominently convey that a consumer who accepts such an offer and continues to use the credit card to make purchases will lose the grace period on the new purchases if the consumer does not
pay the entire statement balance, including the amount subject to the promotional APR, by the payment due date. In addition, depending on all of the facts and circumstances, a credit card issuer may risk engaging in abusive conduct if it fails to adequately alert consumers to this relationship.”

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

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