A federal tool could soon make it easier to compare credit cards

Consumers may soon have an online tool from the federal government aimed at making it easier to compare credit card prices.

The Consumer Financial Protection Bureau said it has started asking major banks for more details on typical interest rates for people with certain credit scores so shoppers can get a better idea of ​​their eligibility for a card. and the interest rate they would pay.

With interest rates rising, the bureau has “modernized” the way it collects data from card companies “to spur competition and help families use products with lower rates and fees,” said said agency director Rohit Chopra in a statement in March.

The bureau already collects information twice a year from the top 25 credit card issuers, as well as a sample of at least 125 other issuers to capture a range of banks across the country, and publishes that information online. . (He inherited the investigative task under a decades-old law.) But the banks only provide information on their most popular cards. And the information is not necessarily easy to use for consumers.

Under the bureau’s new approach, banks are being asked more questions about a card’s terms, such as its interest rate, known as the annual percentage rate, or APR. a card depends on the applicant’s credit score – as most do – banks should report the lowest and highest rates charged, as well as the median APR for scores of 619 or less, for 620 to 719 and for 720 and above.

People often have a general idea of ​​their credit score, the bureau said, so seeing the typical score in their range will allow them to better compare rates between different cards and estimate the potential cost of borrowing. (Credit scores are three-digit numbers that summarize your credit history; the higher, the better.)

Now the top 25 card issuers have to answer questions about all of their credit cards, not just their most popular offers. Other banks are asked to “voluntarily” provide information on other cards. The bureau also encourages any bank — in addition to those that participated in the survey — to submit information so consumers are aware of its offerings.

The bureau seeks more information about each card – asking, for example, if it is a “secure” credit card, which requires a deposit to establish a credit limit and is often used by people with limited credit histories or low credit scores. Banks are also asked about the terms of balance transfers, introductory interest rates and cash advances.

More than a dozen merchant sites already offer bank card comparators. But the sites often work with a relatively narrow range of large issuers, consumer advocates say, and collect fees when shoppers apply for a card. (Most sites disclose this.) Offers from smaller banks and credit unions, which may charge lower rates, may not be included.

“Comparison sites only show products with which they have an economic relationship,” said David Silberman, senior fellow at the nonprofit Center for Responsible Lending. Sites can be useful, he said, as long as consumers understand the limitations. “This is not objective advice.”

The bureau’s decision is part of its efforts to promote consumer-friendly card practices, such as lower fees for late payments. But banks are resisting the bureau’s new approach, calling it too vague.

The American Bankers Association asked the agency in a March 13 letter to abandon its current plan and start over. The association also asked the bureau “to explain its apparent ambition to create a CFPB-run credit card comparison platform in sufficient detail to allow commentators to assess such a proposal.”

Consumer advocates say the idea of ​​a bureau-run comparison tool is promising, but details remain to be seen.

“Certainly, it helps to have this information from an unbiased source,” said Chi Chi Wu, senior attorney at the National Consumer Law Center. But an ideal comparison tool, she said, would allow consumers to compare a true “effective” interest rate that reflects the card rate as well as the impact of any fees, such as annual fees, late fees, balance transfer fees and cash advance fees.

Information about a card issuer’s typical practices would also be helpful, Ms. Wu said. For example, the late fee displayed on a card might be $30, but the issuer might be willing to waive it if you don’t be too late. “If you ask,” she said, “will they take it off?”

Here are some questions and answers about credit cards:

When will Consumer Affairs make detailed card information available online?

The bureau said it began collecting the new details the week of March 21 and the deadline for issuers to provide them was April 20, but it did not say when they would be made available to the audience. The office said in an email that releasing the information to the public as soon as possible was “a priority.”

What factors should I consider when buying a credit card?

Consumers need to think about how they are going to use the card. Will they pay it back every month, or are they likely to have a balance? “Be honest with yourself,” Mr. Silberman said. If you don’t pay the balance in full, you’ll pay interest, so it’s important to get the lowest rate possible.

People often first look for the type of rewards or points they can earn with a credit card, but those benefits are only valuable if you pay your balance monthly, Ms. Wu said. “Any rewards will be eclipsed by the interest rate you pay,” she said.

Pay close attention to the wording of promotions for credit cards, said Ruth Susswein, director of consumer protection at Consumer Action, an advocacy group. If the promotion says the rate is “as low as” 15%, she said, that could well be the case — but maybe only if your credit score is 800 or higher. “Otherwise it does not apply to you.”

Some commercial websites offer free “matching” services to recommend credit cards, but won’t getting multiple recommendations affect my credit score?

Matching services generally offer what is known in the industry as a “soft extraction” of your credit file. It’s not the formal inquiry that happens with an actual inquiry, so it shouldn’t hurt your credit score (which is based on your report data).

But the services also say they don’t guarantee you’ll qualify for a recommended card. And since you generally need to register to use the Services, you may receive offers for other products.

“It’s not going to hurt you,” Ms. Susswein said. “But surely it’s a way to be marketed.”