Credit card-reform legislation known as the Credit CARD Act turns two years old this month, so the Pew Charitable Trusts' Pew Health Group conducted a study to find out how well the Act did at reforming credit card abuses and curbing fees and rate hikes. The Safe Credit Card Project issued a two-page report determining that, overall, reforms are working as consumer advocates intended. The report calls consumer credit cards today "safer and more transparent," and determines that interest rates and fees have gained greater stability since the CARD Act's passage.
The report compared last year's typical credit card offer with this year's and found that, despite the banking industry's dire predictions otherwise, the cost to consumers for acquiring and using credit hasn't skyrocketed. As of this January, the median purchase and cash advance interest rates remained unchanged from last year. The median penalty APR for bank-issued credit cards also remains unchanged, albeit at a stiff 29.99 percent. Credit union rates were, on average, a few percentage points lower than rates for bank-issued credit cards across the board.
The percentage of cards that charge an annual fee as well as the average amount of that annual fee remained consistent with last year's figures. Since last year, the average penalty fee for late payments has dropped from $39 to $35, reflecting the new laws that caps the amount an issuer can charge at $25 for the first offense, and $35 for a subsequent offense within six months of the first one. In another bit of good news for consumers, the number of bank-issued credit cards that charge overlimit fees has dropped from 23 percent to 11 percent.
One area not addressed by the reform legislation is the interest rates credit card issuers can charge; many companies raised their APRs in advance of the CARD Act's implementation or converted fixed rates to variable rates, which gives them a greater ability to change the rate. Another issue of concern for consumer advocates is the exclusion of business credit cards from the reform legislation. Many of the most draconian rules that have been banned for consumer cards, such as hair-trigger rate hikes and excessively high penalty fees, are still present in small business credit card agreements.