Credit Cards: What you need to know

Americans' biggest financial obligation after a home and car is credit card debt, $800 billion of it. New rules make credit card pricing clearer but consumers still must be on guard. Read how new rules affect credit, debit and prepaid cards. Read our new report, "Predatory Credit Card Lending: Unsafe, Unsound for Consumers and Lenders." Read our previous report, "Credit Card Clarity: CARD Act Reform Works," which debunks industry claims that reform raises prices and dries up credit. See our prepaid card tips and warnings on debit card overdraft traps.

 

Fast Facts

Credit Card Fast Facts

  • 72% of people 18 or older in the U.S. (177 million people) have a credit card, with the average cardholder having 3.7 cards and an outstanding debt of $4,679.
  • Paying just a little over the minimum payment each month could save you a bundle.
  • Debit cards eclipse credit cards as the nation’s top non-cash way to pay. Learn about debit card dangers.
  • Prepaid cards, though fairly new, are the nation’s fastest growing non-cash payment method. Get our prepaid card tips.
  • Total credit card debt peaked at the end of 2008 at $989 billion. In 2003 it was $751 billion.
  • Average interest rate paid was 13.44% in the first three months of 2011, compared to 14.38% for the same period in 2006 and 11.96% for the same period in 2003.
  • The Credit CARD Act of 2009 has brought price clarity.

 

More Fast Facts

What Are The Problems?

Despite gains from recent reforms, credit card issuers can still:

  • Employ bait-and-switch tactics by offering rewards that can be cut or yanked for any reason.

  • Close accounts or cut lines of credit without notice.

  • Charge interest rates without limit—and change them for any reason—on new balances.

  • Continue bad practices on business credit cards, which aren’t subject to the new reforms.

  • Judge an individual’s risk—and interest rate—not just from credit bureau information. but from personal information such as where you shop and what you buy.

What Are The Solutions?
  • The Credit CARD Act of 2009 has made prices clearer, without constricting the availability of credit, “Credit Card Clarity: CARD Act Reform Works."

  • The new law says issuers:

    • Can no longer increase interest rates on existing balances, except when an account’s 60 days past due or if already carries a variable rate and the index that rate is pegged to changes.
    • Can no longer allocate a consumer’s payment above the minimum in a manner that maximizes interest rates.
    • Must give 21 days between the date a bill’s mailed and the due date.
    • Must abide by limits on how large a penalty fee can be.
    • Can charge fees no more than 25 percent of a subprime credit card’s line of credit.

       

  • The new, federal Consumer Financial Protection Bureau must monitor credit card industry practices to ensure issuers follow the law and to police for unfair, deceptive practices. And Congress should extend to business credit cards the reforms individuals enjoy on consumer cards.

More credit card policy recommendations.