Price transparency will help families find better credit card deals in a time of rising interest rates
Today, the Consumer Financial Protection Bureau (CFPB) launched an improved survey of credit card issuers that can help consumers and families compare interest rates and other features when shopping for a new credit card. Americans pay $120 billion in credit card interest and fees each year, which contributes to the almost trillion dollars in nationwide household credit card debt. In the current high-rate environment, it is important for Americans to be able to be able to accurately compare products. Upgrades to the CFPB’s terms of credit card plans survey are designed to increase price competition in the credit card market by allowing people to comparison shop for the best prices and products. The survey will also help smaller credit card issuers, who often offer the lowest rates, reach comparison shoppers.
“Given the rise in interest rates, the CFPB has modernized how it collects credit card data to spur competition and help families use products with lower rates and fees,” said CFPB Director Rohit Chopra. “These improvements will also give smaller relationship banks that offer better terms and better service another way to compete against the dominant credit card companies.”
The improvements to the CFPB’s semiannual terms of credit card plans survey are intended to create a neutral data source to help consumers find the best interest rates and products. Currently, consumers can run into many obstacles when shopping for credit cards, including that many big issuers make it difficult for consumers to estimate the interest rate they will pay. The data from the survey also can power digital tools and websites that people can use to find the best products for them, regardless of company size or marketing budget.
For the terms of credit card plans survey, the CFPB collects and makes public the product data on credit cards from the largest 25 issuers and from a sample of at least 125 additional issuers. The goal of the refreshed survey is to provide people with more realistic and practical information to use when comparison shopping for a credit card. The survey will also expand the number of issuers included. Specifically, financial institutions that are not part of the top 25 nor are part of the 125 sampled issuers will be able to voluntarily submit information about their credit card products.
Beginning this week, credit card issuers will start reporting more details on the types of credit card plans they offer. The refresh of the CFPB’s terms of credit card plans survey includes updates that will help consumers easily identify:
- Lower interest rates: With credit card interest rates rising above 20% in 2023, even small percentage changes can have outsized effects on household finances. While financial institutions with relationship banking models often offer lower credit card interest rates, they can also struggle to compete with larger issuers. The changes to the CFPB’s survey will provide them the opportunity to share more information to consumers about their credit card offerings and allow them to compete with bigger players.
- Realistic interest rates: The survey will ask additional questions about a credit card’s annual percentage rate (APR). If a card’s APR varies by credit score, issuers will need to report the minimum and maximum APR offered, as well as the median APR offered by certain credit score tiers. People often have a general idea of their credit scores, so seeing the median APR for their range will allow them to better compare APRs across products and estimate the potential cost of borrowing before they apply.
- Credit card products that best fit their needs: The top 25 credit card issuers will have to answer questions for all their credit cards instead of just their most popular products. All other institutions will be able to voluntarily submit information about multiple products. Questions will also expand the amount of information gathered about each card. For example, there is a new question on whether the product is a secured card or requires a deposit for account opening. There are also questions about promotional terms of balance transfers, introductory rates, and cash advances.
The Fair Credit and Charge Card Disclosure Act of 1988 requires the semi-annual collection of data from the largest 25 issuers of credit cards and at least 125 additional institutions in a manner that ensures equitable geographic distribution within the sample and representation of a wide spectrum of institutions. The results of the semiannual terms of credit card plans survey are a key tool to facilitate credit card shopping by consumers and to enhance competition.
For more information on the survey, visit the terms of credit card plans survey website.
Consumers can submit complaints about financial products or services by visiting the CFPB’s website or by calling (855) 411-CFPB (2372).