Chase Fails to Disclose Interest-Free Grace Period Doesn’t Apply to All New Purchases, Class Action Alleges

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A proposed class action lawsuit has been filed in Delaware over Chase Bank’s alleged practice of charging interest on credit card transactions that have been fully paid off before a billing period’s due date.

Filed against Chase Bank USA, N.A.; JP Morgan Chase Bank, N.A. and JP Morgan Chase & Co., the case notes that Chase allows for an interest-free grace period in which consumers can pay off new purchases without being hit with interest charges. The contractual language that allows for such is included in the lawsuit, stating in part:

“The interest-free period is the time when you are not charged interest on new purchases.

Your account is in an interest-free period when you pay your New Balance as shown on your statement every month by the due date and time. During this period, you will not pay interest on purchases. […] 

We do not charge interest on any part of the purchase balance that you pay while your account is in an interest-free period.”

The plaintiff alleges, however, that though this grace period is clearly outlined in Chase’s credit card agreements with consumers and in the disclosures on the back of the company’s monthly statements, the bank nonetheless “routinely denies consumers the grace period on new purchases” without informing accountholders. From the case (emphasis from the lawsuit): 

“Here’s how Chase’s undisclosed practice actually works. Without notifying consumers, Chase eliminates the grace period for all new purchases if a consumer does not pay off her entire statement balance in a given month. If a consumer leaves even $1 on her account balance after a billing period due date, Chase eliminates the grace period for all subsequent new purchases—even for new purchases fully paid off by the next billing cycle’s due date.” 

According to the 31-page lawsuit, Chase only provides a true grace period to accountholders “who have paid off their balances in full for two prior months,” meaning all but a select few accountholders receive no interest-free grace period at all. As the complaint describes it, when a consumer has failed to pay off his or her statement balance in full, Chase charges interest on every new purchase “from the moment they are made … simply because other, prior purchases were not paid off in full.”

“No reasonable consumer would expect this to be so,” the suit the stresses, “and nowhere is the counterintuitive practice disclosed by Chase.”