For Bankrate's 2009 Credit Card Study, we decided to look at terms and conditions -- the fine print of the credit card agreement. With the passage of credit card legislation, changes to these terms are coming -- but not yet. This study shows where credit cards are today, before the new law takes effect Feb. 22, 2010. (Read Leslie McFadden's analysis to see how the new law will affect these terms and conditions.)
We chose to survey two cards from the top 10 issuers, one platinum card and one rewards card, for a total of 20 cards. We collected data on 14 points of a credit card agreement, including fees, interest rates and what conditions trigger penalty rates. Bankrate market analyst Brooks Kelly conducted the survey in May 2009.
We found that the terms and conditions vary by the issuer, not by the credit card. You can read the detailed results in this table. Here are the highlights of our findings.
Raising rates: All issuers will change your rate if you violate any part of the credit card agreement, but some are more forgiving than others. For example, Discover will raise your rate if you pay late or your account is over the credit limit twice. USAA Federal Savings will raise your rate if you miss two months of "minimum due" payments. All the others will raise your rates if you make one mistake.
Any time, any reason; universal default, etc.: American Express; Bank of America; Chase; First National Bank Omaha, or FNB Omaha; and US Bank come right out and say it: We can change your annual percentage rates, or APRs, at any time for any reason.
Citi won't raise rates unless you have violated the terms (pay late, go over the limit, etc.), but it will review each account when the card is due to expire, "typically every two years." So your rate is really good only for two years.
Only Capital One and Wells Fargo mention "universal default" -- the practice of raising interest rates based on your accounts with other creditors -- by name. Capital One says it does not practice it; Wells Fargo says it only looks at your borrowing behavior with the bank, not with other creditors, in determining your APR.
However, the Capital One fine print says it may increase APRs "if market conditions change," which is another way of saying "at any time, for any reason."
Average daily balance: No double-cycle billing here; all of the issuers use average daily balance for billing.
Average late-fee range: Low: $20.70; high: $38.50.
USAA has a flat late fee of $35; it is the only issuer without a range based on account balance. Most have a three-tiered late fee, depending on the amount of the balance.
Average overlimit fee: $32.
Seven issuers charge the highest fee, which is $39. The lowest is $0 from USAA.
USAA does not allow cardholders to go over their credit limit, which is why its overlimit fee is $0. If a cardholder tries to make a purchase that will exceed the limit, the transaction is declined.