The CFPB's survey is a crucial tool for consumers to make informed decisions when choosing credit cards. By analyzing the terms and conditions of various credit card plans, the survey sheds light on important aspects such as interest rates, fees, and rewards programs. This information empowers consumers to compare different credit card options and select the one that best suits their financial needs.
The Consumer Financial Protection Bureau (CFPB) released the initial findings from its updated Terms of Credit Card Plans survey, revealing that major banks offer less favorable credit card terms and higher interest rates compared to smaller banks and credit unions, regardless of credit risk.
The data show that the 25 largest credit card issuers charge interest rates 8 to 10 percentage points higher than smaller banks and credit unions, potentially resulting in an additional $400 to $500 in annual interest for the average cardholder.
CFPB Director Rohit Chopra stated, "Our analysis found that the largest credit card companies are charging substantially higher interest rates than smaller banks and credit unions. With over $1 trillion in credit card debt outstanding, the CFPB will be accelerating its efforts to ensure that consumers can access better rates that can save families billions of dollars per year."
Key findings from the survey include:
Large issuers offered worse rates across credit scores: Regardless of credit standing, large issuers charge higher interest rates. For instance, the median interest rate for individuals with good credit (620 to 719 credit score) was 28.20% for large issuers and 18.15% for small issuers.
Fifteen issuers reported credit cards with interest rates above 30%: Nine major credit card issuers reported at least one product with a maximum purchase APR exceeding 30%, often through private label or co-branded cards.
Large issuers were more likely to charge annual fees: 27% of large issuers' credit cards had an annual fee, compared to 9.5% for small firms, with average annual fees of $157 and $94, respectively.
The CFPB's updated survey is part of its efforts to enhance competition in the credit card market, including promoting switching through open banking, monitoring bait-and-switch tactics on credit card rewards, closing loopholes allowing junk fees, and encouraging credit card comparison shopping.
In its October 2023 consumer credit card market report, the CFPB noted that over 190 million consumers have at least one credit card, with record levels of debt exceeding $1 trillion and spending reaching $846 billion by the end of 2022.
The CFPB plans to release credit card pricing and availability data every six months, with the next update expected in spring 2024. Additionally, the CFPB is developing a consumer tool to help individuals compare credit card terms and interest rates impartially when searching for a new credit card.
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