Credit card issuers and their lobbyist megaphones blared that the Credit Card Act of 2009 would lead to much higher costs for consumers and much less available credit. More than two years later, it's clear the Act got rid of the more egregious abuses.The credit card business is settling down, and no, the sky didn't fall. That's one takeaway from the Credit Card Landscape Report for the first quarter of 2012.
However, it's striking how high interest rates are on credit cards in an environment where savers are getting somewhere between less-than-1 percent and a-fraction-over-2 percent on their money.
Here are some highlights from the report, with commentary by chief executive Odysseas Papadimitriou.
- Regular Annual Percentage Rates (APRs) for most general-consumer credit cards are higher than in 2011, and 0 percent introductory terms are now 27-37 percent longer.
- Papadimitriou: It seems that consumers prefer 0 percent introductory rates to low ongoing rates, and issuers are responding accordingly.
- Balance transfer fees are 7 percent higher than in Q4 2011.
- Papadimitriou: To compensate for interest revenue lost as a result of increasingly long 0 percent APR introductory periods, issuers are raising balance transfer fees as well.
- Secured credit card interest rates are down 9 percent.
- Papadimitriou: Interest rates on secured credit cards rose unexpectedly during Q4 2011, and I am glad to see them come back down. While secured credit card users can now expect roughly the same APRs as people with good credit, there's really no reason for their rates to even exceed those available to folks with excellent credit, as refundable security deposits provide all the risk protection issuers need.
- Foreign transaction fees are down nearly 5 percent compared to last year.
- Papadimitriou: Foreign transaction fees are decreasing, and I expect this trend to continue given that credit card companies are trying to address the needs of a growing consumer segment that is both aware of foreign transaction fees and eager to avoid them.
- The average cash back initial bonus is 90 percent greater than last year, points and miles bonuses are up 20 percent and regular cash rewards are 60 percent more valuable.
- Papadimitriou: The consumers who are most attracted to rewards credit cards are those who pay their bills in full most often and therefore represent the lowest risk of default. Credit card companies are pulling out all the stops to attract them, and people with excellent credit can use this to their advantage to save literally hundreds of dollars on their everyday spending over the course of a year.