Credit Card Applications More Transparent, Still Not Terrific

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A study published by credit card comparison site last week shows that while the Credit CARD Act of 2009 has helped make the thicket of fine print and legalese somewhat easier to navigate, it’s still a jungle out there. The site’s 2011 Credit Card Application Study looked into the application materials that the 10 biggest issuers made available on their websites to determine how easily a consumer could find out details about APRs, fees and reward redemption rates.

Thanks to the CARD Act, most of the issuers were more transparent in their disclosures than they were in 2010. The study looked at 34 reward and non-reward cards and gave issuers overall percentage “grades” of up to 100 percent. Even numbers nine and 10 (Discover and Citi, respectively) had rankings of more than 80 percent. Discover’s 82.5 percent and Citi’s 82.1 percent were both flat from last year. The only issuer to drop was Wells Fargo, which lost a small 0.8 percent of a percentage point, bringing its ranking down to 87.1 percent.

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By and large, this is good news. Issuers are making decent strides when it comes to spelling out the major terms and conditions of their cards. “Overall, the disparity between the highest and the lowest score is much less in 2011 than it was in the 2010 study,” the authors noted. The biggest gainer was U.S. Bank, which leapfrogged from 10th to the four spot on the list this year; a 32.1 percentage point increase raised its overall score to 91.4 percent. Capital One and Bank of America were numbers one and two, respectively; both were in the same spots as last year, but each raised their total score by a couple of points.

But CardHub’s research does highlight some areas where credit card companies still don’t divulge enough information to prospective cardholders. For instance, a consumer might have to go digging through pages of fine print before figuring out exactly how much rewards are worth. While issuers love to tout the number of points or miles a user can rack up for every dollar they spend, what’s often murkier is determining how many you’ll need to redeem to get a statement credit, airline ticket or merchandise reward.

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Another detail that tends to get buried is how much a cardholder will have to pay if they want to transfer a balance from another card. Offering zero percent APRs on balance transfers has become a popular marketing tactic, but what the issuers aren’t always so up-front about is the fact that a cardholder generally will have to pay around 3 percent for the privilege of making that transfer.

In a discouraging finding, CardHub also notes that some issuers aren’t clear about the interest rate a customer will pay for purchases. This was a more limited problem, but this is also one of the most basic things a consumer should know about a card for which they’re applying. In some cases, a visitor to the issuer’s website has to click through numerous pages to find these details; other times, the company will throw in some vague wording like “rates as low as,” which does little to inform a consumer how much they can expect to pay.