New Credit Card Study Shows Harmful Credit Card Practices Continue
A new study confirmed what cardholders and Congress already knew: credit card issuers are in no hurry to implement the regulations of the CARD Act. Instead, some of the most harmful practices are even more widespread.
Today, the Pew Charitable Trust released “Still Waiting: ‘Unfair or Deceptive’ Credit Card Practices Continue as Americans Wait for New Reforms to Take Effect”. The study examined almost 400 credit cards advertised by banks and credit unions offered in July 2009 and December 2008.
The study found that 100% of the credit cards continue practices that will be outlawed by the CARD Act. The lowest advertised interest rates have increased by more than 20% in the past year. None of the 12 largest banks currently issue cards that would meet the requirements of the CARD Act.
Experts make the observation that a credit card issuer could gain a distinct competitive advantage by the early implementation of the provisions of the CARD Act; instead, it seems that issuers are turning their back on the public outcry for reform and instead want to raise rates as much as possible before these interest rate provisions go into effect in February 2010.
The Pew study found that cardholders have not benefited from the historically low interest rates, even though the Federal Funds rate is almost 0%. The lowest advertised rates increased by more than 20% from December 2008 to July 2009 while the highest advertised rates increased 13% during that time period. Discover had the biggest jump in the lowest advertised rates, going from 9.99% to 12.99%. Bank of America had the largest increase in the highest advertised rates, increasing from 14.99% to 18.24%.
The report is also one of the first credit card comparisons between banks and credit unions. It confirms that credit unions offer lower rates and lower penalties than banks. The findings from the Pew study include:
* Advertised rates were 20% lower at credit unions. These rates ranged from 9.9% to 13.75% annually at credit unions, compared to 12.29% to 17.99% annually for banks.
* Penalty charges at credit unions are less frequent and less severe than at banks. Credit union penalty interest rates averaged 17.99% compared to 28.99% at banks. In addition, these penalty interest rates at credit unions were less likely to last indefinitely; one-third would terminate after three to 12 months of on-time payments. They could last indefinitely at banks, even after on-time payments.
Members of a credit union who are looking for a new credit card are advised to look at those offered by their credit union, comparing those cards to others on the market.