Study Finds CARD Act Saved Consumers $20 Billion Annually
A recent study by the Social Science Research Network shows the CARD Act may have saved credit cardholders over $20 billion annually since its implementation.
The study found that regulatory limits on credit card fees reduced overall borrowing costs by an annualized 2.8% of the average daily balances. There was decline of more than 10% for consumers with the lowest FICO scores.
It did not find evidence of an increase in interest charges or reduction in access to credit that many predicted banks would use to offset the regulations.
The study estimates the fee reductions in the CARD Act may have saved cardholders $20.8 billion per year.
It also found that the requirement for clear disclosures–such as the interest savings from paying off balances in 36 months instead of making only the minimum payment–had a small but significant impact. Cardholders who paid off their balance in three years increased by 0.5%. The study calculated this change in payment reduced interest payments an annualized $24 per revolver, for a total savings of approximately $71 million.
The data set for the study covered over 150 million credit card accounts.