It's been two years since the Credit Card Accountability, Responsibility, and Disclosure Act became law. A new study suggests it may have done at least part of what Congress intended.
The following post comes from partner site LowCards.com.
As the second anniversary of the CARD Act approaches, new research from the Pew Health Group finds that these credit card regulations helped reduce late fees and nearly eliminated over-limit penalties – but have made only minimal changes in annual fees.
The research also claims that interest rates have been stabilized as a result of the CARD Act.
The study, entitled “A New Equilibrium: After Passage of Landmark Credit Card Reform, Interest Rates and Fees Have Stabilized” [PDF], compared credit card solicitations offered online by the 12 largest bank and 12 largest credit union issuers. The data was collected in March 2010 and January 2011.
Some findings from the study:
- Median advertised interest rates have held steady at 12.99 to 20.99 percent. The Pew study says this is unchanged from 2010. “The advertised APRs are relatively unchanged during the last year. But there was almost a year between the passage of the CARD Act (May 22, 2009) and when the major interest rate provisions went into effect (February 22, 2010). During that time, issuers took the opportunity to increase the advertised APR and as a result, interest rates are noticeably higher now than when the CARD Act passed,” says Bill Hardekopf, CEO of LowCards.com and author of The Credit Card Guidebook. “LowCards.com has been tracking the advertised average APR every week for over three years. The week the CARD Act passed, the average advertised rate of the 1,000+ credit cards on the LowCards Complete Credit Card Index was 11.64 percent. Today, it is 14.01 percent.”
- The cost of penalty fees has gone down now that the CARD Act limits first-time late fees. Penalty fees have dropped to the $25-$35 range, a decrease from the previous median of $39.
- Over-limit penalty fees are now almost rare. Only 11 percent of bank credit cards now carry charge over-limit fees. Pew reports this is down from 23 percent in 2010 and more than 80 percent in 2009. Thanks to the CARD Act, transactions that put consumers over their credit limit are now denied, unless consumers have “opted in” to allow those transaction to go through. In those cases, the issuer is allowed to charge the consumer the over-limit fee. The largest credit unions have completely eliminated these fees.
- There has been little change to annual fees. In 2010, approximately 14 percent of bank and credit union credit card offers included an annual fee. In 2011, that number remained unchanged for credit unions and rose to 21 percent of banks. The median annual fee remained at $59 for banks.
- Fees for cash advances, balance transfers, and international purchases have changed only slightly since last year.
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