Study: Credit Card Comparison Sites Don’t Work as Promised

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Credit card comparison websites can help consumers pick the best card for their needs, but the services come with a big possible conflict of interest. Most of these sites have a business model that relies on affiliate marketing: You click and apply for a card, and the site earns a commission. Why is this a problem?

It can leave users wondering (or completely unaware) whether or not the cards that have been selected based on the criteria they plug in are the best choices for them, or simply the biggest moneymakers for the site.

When we evaluated  nearly a dozen comparison sites a few months ago, we found most of the search results lacking. The same handful of cards showed up numerous times, and sometimes didn’t mesh up with the requirements we requested. It appears as if the problem is the pay-to-play business model, which skews the results heavily in favor of a small group of cards issued by an even smaller number of banks.

Advocacy group Consumer Action just released the results of a much larger study, and the conclusions were similar. The group sifted through 54 websites that let people compare credit card offers. The results weren’t pretty; only 13 sites were ranked “useful and complete,” and even those sites weren’t all that great.

(MORE: The Credit Card Companies With the Most Consumer Complaints)

“Our search results show that the same or similar credit cards from the same top five issuers tend to dominate searches on many sites,” the group said in a release. “For example, out of 21 results for “zero percent” balance transfer offers, the Discover More card showed up 9 times, the Capital One Platinum Prestige card four times and Chase Slate three times.”

It found similar results when looking at two dozen cash back offers: Six were for the Capital One Cash Rewards card, five were for the Discover More card and four were for the American Express Blue Cash Everyday card. That’s almost two-thirds of the results going to just three cards.

This flawed business model could even run afoul of FTC rules about disclosing compensation, since some of the sites don’t make it clear that they’re being paid a finder’s fee by the issuers. Consumer Action hit up Richard Cleland, the assistant director of the FTC’s Division of Advertising Practices, who confirmed this hunch. He said the sites need to make “clear and conspicuous disclosures” that they earn commissions for delivering new customers to the issuers. “Hiding it at the bottom of a [Web] page is not enough.”

Consumer Action found, as we did, that the results in card searches for people with bad credit are pretty abysmal. Even running a scenario with “good” as opposed to “excellent” credit shrinks the number of offers or — more worryingly — just yields some of the same results. This means that either people with excellent credit could probably do better, or people with less-than-pristine credit could be denied if they apply. When it searched for cards for people with bad credit, Consumer Action found that a lot of the suggestions were for prepaid debit cards — which don’t help establish or repair a credit history.

(MORE: 7 Steps to a Higher Credit Limit)

These sites also wind up excluding a lot of credit cards offered by small banks and credit unions, which are good options for people fed up with big banks. In some cases, even big issuers who don’t pay to play get left out. Consumer Action noted the conspicuous absence of Bank of America cards on the results it found; when asked, BofA said it doesn’t pay websites referral fees. Given that BofA was the third-largest credit card issuer in the country last year, an unbiased search result that wasn’t skewed by commissions would almost certainly include some of its cards.

Ultimately, Consumer Action came to the same frustrating conclusion we did: Credit card comparison websites are lousy at giving you a comprehensive picture of all the best deals out there. But they do a lot of other stuff well. “We found that most comparison sites offer some great features… balanced consumer education, and a cache of articles on a wide range of credit-related topics,” the study’s authors wrote. These sites can be a good start, especially if you’re looking for information or education, but they don’t replace true comparison-shopping.