Consumers may soon have an online tool from the federal government that is aimed at making it easier to comparison shop for credit cards.
The Consumer Financial Protection Bureau said it had started asking big banks for more details about typical interest rates for people with certain credit scores so shoppers could get a better idea of whether they would qualify for a card and what interest rate they would pay.
With interest rates rising, the bureau has “modernized” how it gathers data from card companies “to spur competition and help families use products with lower rates and fees,” the agency’s director, Rohit Chopra, said in a statement in March.
The bureau already collects information twice a year from the largest 25 credit card issuers, plus a sample of at least 125 other issuers to capture a range of banks throughout the country, and posts that information online. (It inherited the survey task under a decades-old law.) But banks supply information on just their most popular cards. And the information isn’t necessarily easy for consumers to use.
Under the bureau’s new approach, banks are asked more questions about a card’s terms, like its interest rate, known as the annual percentage rate, or A.P.R. If a card’s rate depends on the applicant’s credit score — as most do — banks must report the lowest and highest rates charged, as well as the median A.P.R. for scores of 619 or under, for 620 to 719 and for 720 and above.
People often have a general idea of what their credit score is, the bureau said, so seeing the typical score for their range will let them better compare rates across different cards and estimate the potential cost of borrowing. (Credit scores are three-digit numbers that summarize your credit history; higher is better.)
Now, the 25 biggest card issuers have to answer questions about all of their credit cards, not just their most popular offerings. The other banks are being asked to “voluntarily” submit information about other cards. The bureau is also encouraging any bank — in addition to those in the survey — to submit information so consumers are aware of its offerings.
The bureau is seeking more information about each card — asking, for instance, if it is a “secured” credit card, which requires a security deposit to establish a credit limit and is often used by people with limited credit histories or low credit scores. Banks are also being asked about the terms of balance transfers, introductory interest rates and cash advances.
More than a dozen commercial websites already offer credit card comparison tools. But the sites often work with a relatively narrow range of large issuers, consumer advocates say, and earn fees when shoppers apply for a card. (Most sites disclose this.) Offerings from smaller banks and credit unions, which may charge lower rates, may not be included.
“Comparison sites only show products with which they have an economic relationship,” said David Silberman, a senior fellow at the nonprofit Center for Responsible Lending. The sites can be useful, he said, as long as consumers understand the limitations. “It’s not objective advice.”
The bureau’s move is part of its effort to promote consumer-friendly card practices, like lower fees for late payments. But banks are resisting the bureau’s new approach, calling it too vague.
The American Bankers Association asked the agency in a March 13 letter to give up its current plan and start over. The association also asked the bureau to “explain its apparent ambition to create a C.F.P.B.-run credit card comparison platform with sufficient detail to allow commenters to evaluate such a proposal.”
Consumer advocates say that the idea of a bureau-run comparison tool is promising but that the specifics remain to be seen.
“Certainly, it’s helpful to have that information from an unbiased source,” said Chi Chi Wu, senior staff attorney with the National Consumer Law Center. But an ideal comparison tool, she said, would allow consumers to compare a true “effective” interest rate that reflects the card’s rate along with the impact of any fees, like annual fees, late fees, balance transfer fees and cash advance fees.
Information about a card issuer’s typical practices would also be helpful, Ms. Wu said. For instance, a card’s posted late fee may be $30, but the issuer may be willing to waive it if you aren’t drastically overdue. “If you ask,” she said, “will they take it off?”
Here are some questions and answers about credit cards:
When will the consumer bureau make the expanded card information available online?
The bureau said that it began collecting the new details the week of March 21 and that the deadline for issuers to supply them is April 20, but it did not specify when they would be available to the public. The bureau said in an email that getting the information to the public as soon as it could was “a priority.”
What factors should I consider when shopping for a credit card?
Consumers should think about how they are going to use the card. Will they pay it off each month, or are they likely to carry a balance? “Be honest with yourself,” Mr. Silberman said. If you don’t pay the balance in full, you’ll pay interest, so getting the lowest possible rate is important.
People often look first for what sort of rewards or points they can earn with a credit card, but those perks are valuable only if you pay off your balance monthly, Ms. Wu said. “Any rewards will be overshadowed by the interest rate you’re paying,” she said.
Pay close attention to the wording in promotions for credit cards, said Ruth Susswein, director of consumer protection at Consumer Action, an advocacy group. If the promotion says the rate is “as low as” 15 percent, she said, it may well be — but perhaps only if your credit score is 800 or above. “Otherwise, it doesn’t apply to you.”
Some commercial websites offer free ‘matching’ services to recommend credit cards, but won’t getting multiple recommendations affect my credit score?
Matching services typically offer what’s known in industry lingo as a “soft pull” of your credit report. That is not the formal inquiry that occurs with an actual application, so it shouldn’t mar your credit score (which is based on the data in your report).
But the services also state that they don’t guarantee you’ll qualify for a recommended card. And since you typically must register to use the services, you may receive pitches for other products.
“It’s not going to hurt you,” Ms. Susswein said. “But it’s surely a way to get marketed to.”
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