Lending

CARD Act Holds Down Rates and Fees

Credit cards are more consumer-friendly and transparent.

July 21, 2011
KEYWORDS card , credit , fees
/ PRINT / ShareShare / Text Size +

Credit card holders are seeing steady interest rates, fewer late fees, eradication of over-limit penalties, and minimal changes to annual fees assessed for both credit unions and banks following the implementation of the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009.

These findings are contained in a Pew research report, “A New Equilibrium: After Passage of Landmark Credit Card Reform, Interest Rates and Fees Have Stabilized,” reported in CUNA’s E-Scan Newsletter.

The survey analyzed online consumer card offerings of the 12 biggest banks and 12 largest credit unions from March 2010 to January 2011. These combined financial institutions control more than 90% of America's card debt, Pew reports.

The CARD Act restricted card issuers' abilities to increase interest rates and charge penalties. Further, the act required card issuers to adopt additional consumer-friendly measures, including advance notice of a change in terms.

A comparison of the data reveals that, as a result of the law, cards are indeed safer and more transparent for consumers, and rates and fees are more controlled.

Key findings of the Pew research:

Interest rates remain firm. Median advertised rates for bank cards vary from 12.99% to 20.99% given the consumer's history, reflecting no difference from 2010 to 2011. Cash advances and penalties for bank cards also remain steady.

For credit unions, rates range between 9.99% and 17%, reflecting a small increase over 2010. Cash advance charges for credit unions fell from 11.4% in 2010 to 10.9%.

Penalties are less expensive. Card fees for late payments can no longer exceed $25 as an initial penalty, or $35 for subsequent violation. Thus, the previous median late fee of $39 has declined to a fee now within the Fed’s acceptable range of $25 to $35.

Credit unions have experienced no changes in such fees since the enactment of the CARD Act, with fees remaining at a median amount of $25.

Over-limit fees are nearing extinction. Only 11% of bank cards have such fees—a drop from 23% in 2010 and down from in excess of 80% in 2009. The biggest credit unions offering cards have no over-limit fees attached to their cards.

Annual fees and other service charges make few moves. For 2011, the median amount of annual fees for banks remained at $59 and credit union card fees stayed at a median $25.

Although there was no change in the fee amount, 21% of bank-issued cards charged such fees, up from 14% the previous year.

For credit unions, those charging fees remained unchanged at 14%. Other service charges, such as cash advances, international purchases, and balance transfers reflect only small changes over the previous year.

Post a comment to this story

heroes

What's Popular

Popular Stories

Recent Discussion

Great article! Unfortunately, most employees don’t feel valued or appreciated by their supervisors or employers. In fact, research has shown that the predominant reason team members quit their jobs is because they don’t feel valued. This is in spite of the fact that employee recognition programs have proliferated in the workplace – over 90% of all organizations in the U.S. has some form of employee recognition activities in place. But most employee recognition programs are viewed with skepticism and cynicism – because they aren’t viewed as being genuine in their communication of appreciation. Getting the “employee of the month” award, receiving a certificate of recognition, or a “Way to go, team!” email just don’t get the job done. How do you communicate authentic appreciation? We have found people have different ways that they want to be shown appreciation, and if you don’t communicate in the language of appreciation important to them, you essentially “miss the mark”. Additionally, employees need to receive recognition more than once a year at their performance review. Otherwise, they view the praise as “going through the motions”. A third component of authentic appreciation is that the communication has to be about them personally – not the department, not their group, but something they did. Finally, they have to believe that you mean what you say. How you treat them has to match the words you use. If you are not sure how your team members want to be shown appreciation, the Motivating By Appreciation Inventory (www.appreciationatwork.com/assess) will identify the language of appreciation and specific actions preferred by each employee. You then can create a group profile for your team, so everyone knows how to encourage one another. Remember, employees want to know that they are valued for what they contribute to the success of the organization. And communicating authentic appreciation in the ways they desire it can make the difference between keeping your quality team members or having a negative work environment that everyone wants to leave. Paul White, Ph.D., is the co-author of The 5 Languages of Appreciation in the Workplace with Dr. Gary Chapman.

Your Say: Who should be Credit Union Magazine's 2014 CU Hero of the Year?

View Results Poll Archive