Lowe's Complaint - Lowe’s Credit Card Promotion “No Payments / No Interest for 12 Months" Actually Costs the Consumer More Because Of How Lowe's
Beware of “No Payments and/or No Interest” promotions that retailers market to the consumer in order to induce the consumer to come into the store and make purchases with their store credit card. There is always a catch whenever it comes to credit card promotions and the “marketing” is too good to be true. My case will expose how Lowe’s applies payments sp they can earn the most interest from the consumer even though the promotion states “No Payments / No Interest” and the consumer is lead to believe he/she will not be assessed interest on this promotion balance and will have to make a balloon payment at the end of the promotion period. However, this is not how it works.
The reality of “No Payments / No interest” plans is that account payments are applied to the “No Payments / No Interest” promotion balance first. Your minimum monthly payment does not increase. If your account balance is zero prior to making the promotion purchase then you have nothing to worry about as long as you do not make any additional regular purchases during this period and then revolve the balance. The payment application issue is only relevant to cardholders who have a balance and/or revolve a balance prior to making the “No Payments/No Interest” purchase.
Here is how the payment application process works and how the creditor utilizes the account to maximize their interest income.
I am “Joe” consumer and I have a Lowes credit card.
Joe has purchased $1,500 worth of merchandise from Lowes over the last six months.
Joe makes the minimum monthly payment each month.
Joe’s interest rate is 21% on this card.
Joe sees a Lowe’s ad on TV and the ad is touting “No Payments/No interest for 12 Months” on any appliance purchase over $299.”
Joe’s refrigerator goes out and he remembers the Lowe’s ad so he goes to Lowes to buy a $1,200 refrigerator.
Joe uses his Lowe’s credit card to make the purchase and takes advantage of the 12-month promotion.
Joe receives his Lowes bill in the mail a month later. The minimum payment has not increased but the new refrigerator purchase has posted to his account.
Joe makes the minimum payment of $50 and thinks the payment will be applied towards his regular purchase balance.
Joes gets his statement the next month. Low and behold, the payment is credited towards the “No Payments/No Interest” promotion balance instead of the regular purchases amount so therefore Lowes has earned additional interest on the $50 because the payment was not applied to the balance that is used to compute finance charges.
Joe continues making his minimum monthly payment and sees his promotion balance decrease while his regular balance increases. The regular balance increases because payments are not applied to the regular balance but instead to the promotion balance and therefore interest compounds and costs Joe more.
How does Joe rectify this? He calls Lowes credit and tells them to reapply the payment to the regular balance and not the promotion balance. He has to call them each month. At the end of month 12, he will now have a balloon payment and have to pay for the refrigerator in full or he will be assessed finance charges as of day one when he made the purchase.