Is Your Credit Card Company Upfront with its Customers?

Do you know what to look for before you apply for a credit card? If you’re not prepared ahead of time, there’s a good chance you might miss some key information on your credit card agreement. A recent study from CardHub.com found that many issuers still lack transparency on their credit card applications, despite recent regulations under the new credit card law (Credit CARD Act) meant to promote clarity in the credit industry.

The Summer 2010 Credit Card Application Study evaluated how much information could be gathered on a credit card application without reading the fine print, as this is what most consumers see before they apply for a credit card. The study evaluated the 10 largest issuers on the clarity with which they disclosed essential information such as APRs, common fees, and details on rewards programs. It was determined that the ideal application would have this information clearly displayed, without the applicant having to actively search for it.

Of the issuers evaluated, Capital One and Bank of America ranked the highest, with scores of 96.4 percent and 95.0 percent, respectively. The issuer that performed the worst in the study was U.S. Bank with a score of 59.3 percent. USAA and American Express followed with scores of 77.5 percent and 78.3 percent, respectively.

The category in which issuers performed poorly across the board was clear disclosure of the balance transfer fee. It is particularly important that this fee is clearly displayed because it less likely that a consumer would know to look for it (as opposed to knowing to look for the APRs) and it can cost the applicant a significant amount of money.

Applications were also consistently lacking in information on rewards programs for non-cash-back rewards credit cards. There was often information on how to earn rewards (e.g. one rewards point for every $1 spent), but it was often difficult to find how much rewards points and miles were actually worth (i.e. is 15,000 points worth a trip to Florida or a trip to Europe?). In order to find this information, the applicant typically had to read the fine print and in some cases navigate to an entire new section of the website.

Although clarity was lacking in some areas, there were also signs of improvement. Vague language and phrases such as ‘up to’ and ‘as low as’ were found to have diminished considerably. It was also often fairly easy to find information about the annual fee and in many cases the introductory APRs.

This improvement is encouraging, but the fact remains that in order to truly know what you’re getting into when applying for a credit card, you must carefully read the terms and conditions of your credit card agreement. If nothing else, be sure to look for the introductory and regular APRs for purchases and balance transfers, the annual or monthly fees, the balance transfer fee, and details on your rewards program. This will give you a good start for being your own financial advocate.

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About the Author: Odysseas Papadimitriou

Odysseas Papadimitriou is the founder and CEO of Card Hub, a website that helps consumers compare credit cards and gift cards.

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