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CFA-CUNA card survey reveals consumer reaction to rule changes
WASHINGTON (2/10/10)-- A recent survey commissioned by the Consumer Federation of America (CFA) and Credit Union National Association (CUNA) revealed that, while most consumers (61%) are aware there are new credit card protections, most (65%) don’t know they take effect later this month and don’t understand the specific protections the U.S. Congress approved last year. “We are especially concerned that some consumers will base their future credit card use on protections that don’t exist,” said CFA Executive Director Stephen Brobeck. He noted, for example, that 36% of credit card users think that the new law caps late fees at $35, while 31% believe it caps interest rates at 20%. The new law does neither. The survey also revealed, however, that a large majority of consumers who have noticed disadvantageous changes in the terms of their most frequently used credit card are taking or plan to take some kind of remedial action, most frequently using the card less frequently (69%) and/or paying off the remaining balance faster (62%). “We are encouraged that 85% of consumers reported planning or taking action when aware of a rate hike, new fee, lower credit limit, fewer rewards, or other disadvantageous terms,” said CUNA Chief Economist Bill Hampel. Some issuers, Hampel warned, have used the interim period between the signing of the new law and its Feb. 22 effective date to change the terms of use on their cards. The survey was conducted for CFA and CUNA by Opinion Research Corporation, which polled a representative sample of 1,013 adult Americans Jan. 28-31. Of those respondents who use credit cards, half said they have noticed some type of recent change in terms by the card issuer. Twenty-eight percent of those respondents say they have been notified of an increase in their interest rate. The three other most likely changes noted by card users were a new fee or fees (18%), an increase in existing fees (18%), or a reduction in rewards (17%). “Considering all the credit card mailings they typically receive and the complexity of some of these disclosures, it’s a positive sign that many consumers have noticed the changes,” said CUNA’s Hampel. He also noted that the new card rules make rate comparisons between cards more possible and encouraged consumers to make such comparisions. He said that credit unions often offer more favorable card rates to consumers, but encouraged across the boared comparisons. Also of note, the CUNA/CFA survey indicates consumers are taking or planning action in response to those recent changes by the card issuers. Nearly seven out of eight (85%) of credit card users who reported a change in terms are doing so. That group of consumers says the two most likely actions are to use the card less frequently (69%) and to pay off the remaining balance faster (62%). Other frequently mentioned responses are to stop using the card (45%) and to use another card (34%). Less frequent reactions are to cancel the card (22%) or apply for a different card (12%). “The new rules are leading to changed behavior by card companies, and consumers would be very well advised to pay particular attention to terms and conditions, fees and rates on their cards to make sure they have the best deal,” said Hampel. “Our data show more consumers are turning to credit unions’ credit cards, which typically do offer lower rates and compare more favorably than other issuers’ cards.” The CFA and CUNA offered two key consumer tips for smart credit card use. The most important practices to adopt, the groups said, are to make monthly payments on time and try hard to pay down, and pay off, balances on all cards. Just one late payment can trigger not only a late fee but also an interest rate hike on the card, an interest rate hike on other cards, and a lower credit score. Some consumers just don’t understand how important it is to make their credit card payments on time,” noted CFA’s Brobeck. FOr more details on the survey, and on the Fed's new credit card rules, use the resource links below.
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