Credit Card Rates & Fees Have Stabilized Two Years After Credit CARD Act’s Passage

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WASHINGTON, D.C. – Research show that credit card interest rates have stabilized and consumers are seeing a reduction in some fees following changes made by federal law in 2009.

The recently-released report by the Pew Safe Credit Cards Project looks at all consumer credit cards offered online by the nation’s 12 largest bank and 12 largest credit union issuers. Together, these institutions control more than 90 percent of the nation’s outstanding credit card debt. Pew collected data in March 2010 and January 2011 to measures how the industry has changed since the passage of the Credit CARD Act. Full details of the study can be found at www.pewtrusts.org/creditcards.

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“Pew’s research shows that predictions that the legislation would spark new charges and long-term interest rate growth have not materialized,” said Nick Bourke, director of Pew’s Safe Credit Cards Project. “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. Consumers are enjoying safer, more transparently priced credit cards – and banks and credit unions are able to compete on a more level playing field.”

The research shows that the median advertised interest rates for purchases on bank credit cards remained unchanged from 2010. Meanwhile, bank cash advance and penalty rates held firm. Additionally, the percentage of cards with annual fees held steady for credit unions, at 14 percent, and increased for banks, from 14 percent in 2010 to 21 percent in 2011. The amount charged for annual fees remained unchanged.

Since the enactment of the legislation, overlimit penalty fees have all but vanished. Only 11 percent of bank credit cards now include them, while the largest credit unions have eliminated them entirely. Pew’s research finds that late fees continue to be widespread. However, the cost of fees has gone down now that the law limits first-time late fees to $25 in most cases.

The Credit CARD Act, signed on May 22, 2009, aimed to protect consumers by restricting when interest rates can be raised on existing balances and banning “unfair or deceptive” practices. It also allowed new rules to be created to ensure that late charges and other penalties charged by issuers are “reasonable and proportional.”

“The Credit Card Act is an excellent example of how bipartisan legislation can be enacted that both protects consumers from potentially harmful practices while simultaneously creating a marketplace where banks and credit unions are able to compete based on clear and predictable pricing,” said Eleni Constantine, director of the Financial Security Portfolio at the Pew Health Group. “Congress should take a similar approach to make other financial products, such as checking accounts and short-term, small-dollar loans, safer and more transparent.”


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