While interest rates continue to creep up and rewards continue to disappear, the trends in 2010 aren't as bad as those of last year.
Editor’s note: This post is from partner site LowCards.com.
2009 was a difficult year for many credit card customers. Interest rates increased significantly, credit limits were slashed for millions of cardholders, issuers closed risky accounts and rewards were decreased. Many consumers wondered what would happen after the CARD Act and other regulations went into effect in 2010. Would these regulations really help consumers?
“Despite regulations, credit card issuers are still increasing rates and fees in 2010, but less dramatically than last year,” says Bill Hardekopf, CEO of LowCards.com and author of The Credit Card Guidebook.
Here are some of the changes that banks and credit card issuers have made during the first half of 2010.
Compared to 2009, this has been a slow year for rate increases. Issuers increased rates dramatically in 2009 while it was still easy to raise rates, and most issuers have not made wide-ranging rate increases since then. But rates have continued to increase during 2010. Here are some recent changes:
- Capital One increased the rate on its Classic Platinum credit card from 16.9% to 19.8% and on the No Hassle Cash Rewards card from 17.9% to 19.8%.
- Citi increased its Cash Advance APR from 21.99% to 25.24%. (February 2010)
Overall, rates are still rising. Based on the 1000+ cards in the LowCards.com Complete Credit Card Index, the average advertised APR for credit cards this week is 13.64%, Six months ago, the average was 13.25%. One year ago, the average was 12.10%.
- Discover increased the cash advance fee from 3% with a $5 minimum to 5% with a $10 minimum. (January 2010)
- Bank of America added an annual fee for a limited group of cardholders that started in February. The fee ranges from $29 to $99 and is applied to the selected accounts based on risk and profitability.
- Citi increased its balance transfer fee from 3% to 4%. (June 2010) It also increased the cash advance fee increased from 3% to 5% with a minimum fee of $10.
- Citi added a $60 annual fee to some credit card accounts, effective April 1, 2010. Make $2,400 in purchases each year and the annual fee will be credited back to your account.
- Banks are already preparing new fees on basic banking services as they try to replace revenue lost to recent regulatory rules. HSBC and Wells Fargo ended their free checking accounts. Bank of America is testing account fees and options that will be added later this year. Other banks could join in.
Some Niche Cards and Popular Offers are Discontinued
- Credit card issuers have discontinued some of the specialized cards that were targeted to consumers during a time of free-flowing credit. Chase closed the Starbucks Duetto Visa and credit card deals with Avon Products, Inc., The Detroit Pistons, the Orlando Magic, and the New Jersey Devils.
- Bank of America also reduced the number of niche cards. The Wall Street Journal reported that Bank of America currently has about 4,400 affinity cards, down from 5,000. These are typically offered through college alumni associations and charities.
- The Wall Street Journal also reported that Chase now has about 110 co-branded credit cards, down from more than 200. Issuers seem to be eliminating these cards to cut costs and reduce their risk of delinquencies by card holders.
- Charles Schwab no longer accepts new applications for its acclaimed cash rebate credit card that was recommended by many consumer advocates and financial writers. The rebate was 2%, one of the most generous cash rebates available, and it was deposited into a brokerage account.
- The National Football League is moving its branded credit card business from Bank of America to British banker Barclays. This is forcing customers to scramble to spend reward points before they expire next month. They will have to apply for the new card to continue earning NFL rewards.
Expanding Introductory Offers
Some credit card issuers are increasing intro offers back to 12 and even 18 months. This is sign that issuers are competing again for new customers. Until recently, issuers had slashed some intro rates periods to only three or six months, depending on the credit score.
- For some applicants, Discover increased the intro period for balance transfer increases from 12 months to 15 months for Discover More. (July 2010).
- Citi expanded the intro period to 18 months for all balance transfers to Citi Platinum Select. It was previously a tier of 18, 12, or 7 months.
- Iberia Bank Visa Select Card expanded the intro rate on purchases to 0% for 12 months (formerly 7.5% for 12 months). It lowered the intro rate to 1.99% for balance transfers during the first 12 billing cycles (formerly 7.5% for 12 months).
New Offers and Targeted Incentives to Encourage Spending
- Chase and Continental Airlines launched the new Continental Airlines OnePass Plus Card and added new features and benefits to the existing Continental Airlines Presidential Plus Card.
- Chase revised Freedom Rewards. It now offers a 5% cash-back rotating rewards promotion on its Chase Freedom card. However, it requires cardholders to register every three months in order to continue earning that level of cash back on spending categories that change every three months.
- Delta and Continental now waive checked bag fees for at least one bag if the ticket is purchased with their affiliated credit card.
- American Express offers selected cardholders a $30 statement credit for shopping at six of the designated retailers by August 30, 2010.
More Credit Card Offers in the Mail
During the first quarter of 2010, US households received 481.3 million credit card offers, a 29% increase from the 372.4 million offers mailed during the same period a year ago, according to the latest study by Synovate Mail Monitor. Some credit card issuers, such as Capital One and HSBC, more than doubled their mail offers during this quarter versus the prior quarter.
The study also showed direct mail offers are also becoming more widespread for soliciting new debt as more issuers offer attractive introductory interest rates. 65% of the total offers mailed in the first quarter had an introductory purchase APR compared to just 58% in the final quarter of 2009.
Consumers with good or excellent credit scores seem to be receiving the majority of these direct mail pieces.
“The consumers with above average credit scores are the ones that most every issuer wants,” says Hardekopf. “They pose less risk.”