Credit cards’ worst practices are more widespread
New study details card companies' increasingly punitive terms.
Need more proof that credit card companies aren’t treating customers with more consideration before the Credit CARD Act actually takes effect next year? A new Pew Charitable Trusts study has details.
Pew reviewed terms offered by nearly 400 credit cards in July and compared them with terms for those cards back in December. Card companies aren’t gradually adopting better behavior as the Feb. 22 deadline for many of the reforms draws near. In fact, the opposite is true.
Not only have credit card companies continued to use practices that will be outlawed under a strict law due to take effect in February, in many cases their policies have gotten harsher since the law passed.
"Some of the most harmful practices have actually grown more widespread," Shelley Hearne, who helped oversee the Pew study, told ABC News. "Not one of the bank cards reviewed would meet the legal requirements outlined in the Credit CARD Act."
For instance, by July:
- Nearly all of the cards reserved the right to change interest rates on outstanding balances at any time, up from 93% in December. (As of Aug. 20 under CARD, companies are now required to give 45 days’ notice.)
- 95% of cards could apply payments to charges with the lowest interest rates first, rather than those with the highest rate.
- 90% had penalty interest rates, triggered by one or two late payments.
- The lowest advertised interest rates jumped 20%.
- The highest advertised rates rose 13%, Bloomberg said.
Credit unions, on the other hand, look mighty attractive. “In contrast, Pew found that the 12 largest credit unions, which have just 1% of the market, have lower interest rates, lower fees and less punitive policies,” AP said.
Forbes offered details:
- “The credit unions studied charged a high of 13.75% interest on cash advances, versus as much as 21.24% by banks.”
- Banks raised the card interest rate to an average of 28.8% after late payments. At credit unions, it was $17.9%.
- The median late fee at banks was $39, compared with $20 at credit unions.
What’s a consumer to do? Many are also being subjected to higher rates, higher minimum payments, lower credit limits and less generous rewards.
If you don’t like your card company, find a new one, an industry representative said.
"Rates and fees are in response to increased risk presented by borrowers and by economic conditions in general," said Scott Talbott of the Financial Services Roundtable industry group. "We are talking about the riskiest form of lending. Bottom line: People are free to shop around."
Copyright © 2014 Microsoft. All rights reserved.
ABOUT SMART SPENDING
LATEST BLOG POSTS
VIDEO ON MSN MONEY
BLOGS WE LIKE
MUST-SEE ON MSN
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'