Loan Deal Could Become Costly
Expenses can easily outpace income during the holidays, so the lure from your credit card company this time of year can be especially tempting: Cash this check, and the money is yours for a super-low interest rate.
Judy Foster found out that the deal was indeed too good to be true.
Foster, a former market researcher, recently received checks in the mail from her credit card company. The offer: She could cash the checks for up to $10,000 and pay 1.99% interest on the money for six months.
Foster, looking to celebrate her recent retirement, took out the $10,000 loan to finance a vacation. But later, when the Torrance resident mailed her credit card company an $8,000 check to pay off her charge card, she found that the money was used to pay off the 1.99% loan -- and not the credit card, which charges her 19.9% interest.
To make matters worse, she said, the offer letter that came with the checks gave no clue that would happen.
"I'm not a stupe. I read every word of the letter, which said that they were making this offer because I was such a good client," she said.
Foster said she called the credit card company to find out why she couldn't apply the money toward the higher-interest charge card, and to ask about a "transaction fee" she was assessed.
"They kept saying, 'Per your credit card agreement
The answer was yes. Or if the terms were not disclosed in the initial agreement for the card, they probably were disclosed in a subsequent mailing, consumer credit experts said.
What the credit card company did may have been misleading, but it's not illegal, said Ken McEldowney, executive director of Consumer Action, a San Francisco group that does annual credit card surveys.
McEldowney said Foster almost certainly received a disclosure detailing the terms of the deal but probably didn't recognize it because it was separated from the loan pitch. In fact, she had probably received several updates to the disclosure agreement she received 13 years ago, he said, through statement stuffers that many consumers simply throw away.
"Unfortunately, this is standard industry practice," said Greg McBride, financial analyst at Bankrate Inc., a credit-tracking firm based in North Palm Beach, Fla., that operates a financial services website.
