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Choosing a credit card isn’t always easy, but soon there may be a simpler way to find the best card for you. Read to learn more.
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If you’ve ever gone shopping for a credit card, you know it can be overwhelming. There are so many different options and criteria that go into choosing the right card for your needs. But soon, there will be a federal tool available that may make this process much easier. The Consumer Financial Protection Bureau (CFPB) is asking banks to provide more information, such as who qualifies for which cards, the interest rate based on credit scores, and more. This will help the CFPB create a comprehensive database to help consumers comparison shop for the best credit cards.
How it works
The Fair Credit and Charge Card Disclosure Act of 1988 mandates the gathering of information twice a year from the top 25 credit card issuers, as well as 125 other institutions. However, banks typically only offer information on their most popular credit cards. In addition, the information provided is not the most user-friendly. This can lead to frustration and confusion for those trying to decide which credit card to choose.
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As a result, the CFPB is asking banks to start reporting more details on the types of credit card plans they offer, interest rates, promotional terms of balance transfers, introductory rates, cash advances, and more. The top 25 credit card issuers will have to answer questions for all their credit cards instead of just their most popular products. All other institutions will be able to voluntarily submit information about multiple products.
The intent for the enhanced credit card issuer survey is to empower consumers to easily compare features like interest rates, annual fees, rewards, introductory interest rates and penalty interest rates, when shopping for a new credit card. Additionally, the CFPB wants banks to provide details on what qualifications consumers need in order to receive a certain card — such as minimum credit scores — so consumers can get an idea of their chances of being approved before they apply.
Why this matters
Every year, Americans pay $120 billion in credit card interest and fees, adding to $1 trillion in total credit card debt. With credit card interest rates skyrocketing above 20% in 2023, a small percentage change can greatly affect household finances. It is important for Americans to be able to accurately compare and find the best credit cards for their needs.
Smaller credit card issuers and relationship banking institutions often offer lower credit card interest rates, but they can struggle to compete with larger issuers. The updated survey will now allow these institutions to showcase their credit card offerings and finally level the playing field.
This new system should also help protect consumers from predatory practices by providing more transparency regarding how credit cards are marketed and sold. For example, if banks fail to disclose all the fees associated with a particular card, then potential customers should be able to spot this discrepancy when looking at different cards on the CFPB’s website.
Currently, there are close to 600 million credit card accounts in the U.S. It can be difficult for people to find the card that best suits their needs. With this new system from the CFPB, however, choosing a credit card could soon become much simpler. Not only will users have access to more detailed information about which cards are offered by which banks (as well as what qualifications they need in order to qualify), but they’ll also be able to quickly compare features like annual fees, rewards programs and interest rates in order to find the perfect fit for their financial situation.
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