The Credit Card Accountability Responsibility and Disclosure (CARD) Act have made plenty of changes since it has been put into effect since last year, but a study conducted by the Pew Health Group shows that there can be some improvements in some areas.
The study, known as the "Two Steps Forward: After the Card Act, credit cards are Safer and More Transparent, have analyzed the status of credit card market and have compared its situation before and after the CARD Act had been established. The study also reviewed almost around 450 credit card offers provided online by twenty-four of the largest banks and credit unions.
Findings show that rates are increasing. Purchase interest rates have overall increased by 30% from December 2008 to March 2010 in which the rates went from 9.99%-15.99% to 12.99%-20.99% during that time period. Meanwhile, the Federal Reserve rule of increasing penalty rates for delinquent accounts has started a new trend that is detrimental to consumers. Certain credit card issuers no longer cite the amount of the penalty rate and its terms other than a single sentence stating that these issuers have the right to impose penalty fees. This trend does against regulations, as cardholders have the right to know about such information.
Meanwhile, 78% of the surveyed banks offered introductory rates for balance transfers and purchases, while seven months is the median introductory period. Also, none of the banks offered any fixed rates on credit cards.
The report also shows that rewards are used to penalize credit card users who are late for payment. 23% of the surveyed banks make use of rewards by putting limitations on card users, which prevent them from collecting any more reward points or similar benefits as long as they have late payments or account penalties.
Also, legislation have not made any increases in new annual fees and the number of credit cards that charge those fees have dropped by 1% between July 2009 and March 2010. But during that period, median annual fees have risen to $59 from the previous $50. While balance transfer and cash advance fees have also increased during that same time period.
The recommendations offered by the study include the disclosure of the penalty fees and their terms and conditions, and that these instructions must be explained clearly and thoroughly. Also, all the maintenance fees should be consolidated into one single fee so that the pricing would be clear and easy to understand. There should also be some total monthly payments applied to balances that have the highest rate. Also, the penalty rate should not exceed more than 7% of the non-penalty rate. The mandatory binding arbitration clause should also be removed. The transaction surcharges should be monitored in order to better protect them from hidden costs that could be deceptive.