A New Equilibrium
After Passage of Landmark Credit Card Reform, Interest Rates and Fees Have Stabilized

As the two-year anniversary of the Credit Card Accountability, responsibility and disclosure (Credit CArd) Act approaches, new research from Pew confirms that consumer credit cards have become safer and more transparent while interest rates and fees have stabilized since the Act’s new reforms have taken effect. Pew’s latest analysis compares credit card solicitations from January 2011 to those from previous years.

• Interest rates have held steady. Median advertised interest rates for purchases on bank credit cards—12.99 to 20.99 percent depending on a consumer’s credit history—remained unchanged from 2010. Similarly, bank cash advance and penalty interest rates held steady. At the same time, median credit union purchase rates were between 9.99 percent (lowest advertised) and 17.00 percent (highest advertised), a slight increase over last year. Credit union cash advance interest rates have declined during the period.
• Penalties cost less. In 2010, the Federal Reserve began enforcing the Credit CARD Act’s requirement that penalty fees in general be “reasonable and proportional” to the violation. The Fed now allows issuers to charge a penalty of up to $25 for a late payment or other violation, or up to $35 for any additional occurrence within the next six months. The cost of penalty fees has since gone down on bank credit cards from a previous median of $39 to the $25–35 range allowable under the Fed’s rules. Penalty fees have held steady on credit union cards at $25.
• Overlimit penalty fees have become increasingly rare. Only 11 percent of bank credit cards now carry them (down from 23 percent in 2010 and more than 80 percent in 2009), while the largest credit unions have eliminated overlimit fees entirely. Late fees continued to be included on more than 95 percent of all credit card products.
• Annual fees and other charges have changed little. In 2010, approximately 14 percent of bank and credit union card offers included an annual fee. In 2011, the percentage of credit cards with annual fees was unchanged for credit unions (14 percent) and rose for banks (21 percent). The median size of annual fees held steady at $59 for banks and $25 for credit unions. Transaction surcharges for cash advances, balance transfers and international purchases have changed only slightly since last year.