Credit card terms have not changed much in the past year, despite some concerns that issuers would hike interest rates and fees on new accounts to offset the effects of restrictions imposed last year under the Credit Card Accountability, Responsibility and Disclosure Act, according to new data from The Pew Health Group.
Most provisions of the Credit CARD Act went into effect in February 2010, including a rule prohibiting issuers from raising existing cardholders’ interest rates, except in limited cases. Other new safeguards included applying payments first to cardholders’ highest-interest balances and notifying consumers of any pending changes in their interest rates.
As part of its ongoing analysis of the credit card industry through its Pew Safe Credit Cards Project, the Washington, D.C.-based nonprofit organization recently compared card interest rates and fees touted in online card solicitations among the 12 largest U.S. banks from January 2011 with those from March 2010.
The organization found that median advertised interest rates for purchases have held steady at 12.99% to 20.99%, depending on a prospect’s credit history.
Some 95% of all online card solicitations in January featured penalty fees for payments received after their due date, unchanged from a year earlier, but the fees are somewhat lower. Penalty fees for late payments within the past year have declined to a range of $25 to $35 from a median of $39 a year ago, Pew found. The Credit CARD Act limits late-payment fees to $25 for the first violation and $35 for subsequent violations within six months.
Fees for exceeding card credit limits have fallen dramatically. Only 11% of new card offers in January carried penalty fees for cardholders exceeding their credit limit, down from 23% that did a year ago and the more than 80% that did in 2009.
The percentage of card offers with annual fees rose slightly compared with a year earlier. Some 21% of bankcard offers in January included an annual fee compared with 14% a year earlier.
Annual fees on new card offers held steady at $59 for banks and $25 for credit unions, Pew found.
“Pew’s research shows that predictions that the legislation would spark new charges and long-term interest-rate growth have not materialized,” Nick Bourke, director of Pew’s Safe Credit Card Project, said in a press release. “Whatever increases in advertised interest rates we saw going into 2010 have not continued into 2011. The act created a new equilibrium, where interest rates have flattened, penalty charges have declined and a number of practices deemed ‘unfair or deceptive’ have disappeared.”
The data compare favorably with certain other recent analyses of direct-mail credit card solicitations within the past year. According to Mintel Comperemedia, the percentage of card offers measured in March featuring low-interest annual percentage interest rates lasting at least 13 months increased from a year earlier (
Mintel in August also reported that the fallout from the Credit CARD Act had not produced the negative effects many in the industry were predicting (
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