Image: Stack of credit cards © Fuse, Getty Images

Back in 2009, the Credit Card Accountability, Responsibility and Disclosure Act was signed to great fanfare, with the White House lauding it as a "turning point for American consumers." The question is, which way have things turned for consumers? By at least one measure, the CARD Act may have been a multibillion-dollar turn in the wrong direction.

The CARD Act was implemented on Feb. 22, 2010, and two years seems a fair time to assess its successes, failures and overall implications for consumers with credit cards.

Counting the costs of the CARD Act

Though the CARD Act did not take effect until February 2010, it had been signed by President Barack Obama nine months earlier, and it had been discussed openly for months before that. In the interim, there was a flurry of activity among credit card companies as they adjusted their rates and fees, presumably in anticipation of the new law.


So, to get a true reading on the impact of this law, it was necessary to go back to late 2008 for a look at how things were before anticipation of the CARD Act started to change things. To do this, compared terms on roughly 500 credit card offers from late 2008 and late 2011, and found the following impacts that may be attributed to the CARD Act:

  • Higher interest rates. From the end of 2008 through late 2011, the prime bank rate was unchanged and mortgage rates fell. Credit card rates, on the other hand, rose. The study found that annual percentage rates on new credit card offers rose by an average of 2.1% over that period. While these higher rates wouldn't have immediately affected existing customers, over time this new rate environment would start to affect more and more balances. Based on roughly $800 billion in outstanding U.S. credit card debt over much of the past two years, this 2.1% increase in credit card rates would translate to an annual additional consumer cost of $16.8 billion.
  • Heavier burden on customers with poor credit. In part, the CARD Act was intended to protect customers with credit problems. Those cardholders were subject to the steepest rises in their credit card rates. However, these same customers appear to have been hurt the most by rising rates over the past few years. While the lowest rate tier of credit card offers, for consumers with excellent credit, rose by only 1.6% from late 2008 to late 2011, the highest rate tier, for consumers with poor credit, rose by an average of 3.4% over the same period.
  • Ballooning balance transfer fees. Balance transfer fees also have risen over the past few years. For one thing, fewer cards cap the maximum balance transfer fee. Instead, they charge a percentage of the amount transferred. In late 2008, 31% of credit card offers had a cap on balance transfer fees. Now, just 4% do. In addition, the average percentage charged has risen to 3.3% from 2.1%, a difference that would cost you an additional $120 on a $10,000 balance transfer.

Can all of these costs be blamed on the CARD Act? Given the aftermath of the 2008 credit crunch and the significant market changes as a result (including credit card companies reducing credit lines or canceling cards outright in order to manage their risk), it's impossible to be certain. But as the most significant change in the industry between the two time periods that were compared, the CARD Act seems to bear much of the responsibility.

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