Five largest Visa and Mastercard issuers had mediocre scores in Consumer Reports’ latest credit card ratings
Cards from credit unions among highest rated, popular cards American Express and Discover score well
YONKERS, NY — The nation’s five largest MasterCard and Visa issuers — JPMorgan Chase, Bank of America, Citibank, Capital One, and HSBC, which control about 80 percent of the market —earned so-so scores in Consumer Reports’ latest ratings of credit cards.
The survey, conducted by Consumer Reports National Research Center, covered 36,298 reader’s experiences with 61,944 cards. More CR readers who used those banks’ cards complained that they were assessed unfair late fees or experienced unexpected interest-rate increases than readers who held cards from the top-rated issuers. It found that consumers had far fewer billing headaches and other problems with the card issuers at the top of the ratings.
The card issuers that scored especially high in the ratings – USAA Federal Savings (limited to members of the military, retired military personnel and their families), the Navy Federal Credit Union, and a group of other credit unions — also charged median interest rates between 9 and 11 percent, compared with the 17 percent imposed by the two issuers at the bottom of the ratings: Direct Merchants and Providian (now offered by Washington Mutual). USAA Federal Savings, which issues American Express and MasterCard-branded cards, earned a reader score of 95 out of a possible 100. That’s one of the highest scores CR has seen in recent years.
Reader scores ranged from USAA’s high of 95 points to Providian’s low of 61. A score of 100 means that all respondents were completely satisfied; 80 would mean very satisfied, on average; 60, fairly well satisfied. (Differences in reader scores of less than six points are not meaningful.)
Readers reported that they were very satisfied with two other popular credit cards, American Express and Discover, whose median interest rates were 14 and 15 percent, respectively. Credit card issuers were rated on respondent’s reports of unexpected rate increases or rates that turned out to be higher than initially offered, bill-timing problems, and problem resolution when respondents contacted the card issuer for support. The full report can be found in the October issue of Consumer Reports, on sale September 4. Portions of the report will be available for free on http://www.ConsumerReports.org.
“It’s more important than ever to have a card with a higher Consumer Reports rating because the lower-rated ones can cost you a lot due to their higher interest rates and fees,” said Amanda Walker, Senior Editor, Consumer Reports. “Credit unions are run by their members, so they are more likely to take care of you if you have a problem, and they are less likely to suddenly increase their interest rates.”
Years ago, credit union membership was limited to people who were linked in some way, by working for the same employer, or living in the same town, for example. However, almost anyone can join a credit union these days, and it might be a good idea, if only for a good credit card.
Two retailers also scored very well: Cabela’s, which sells sporting equipment, and Nordstrom, an upscale department store. Both companies charge average interest rates on their Visa cards and have a long history of superior customer service. For example, they both have very liberal return policies and Nordstrom even pays the postage for exchanges sent through the mail.
According to CR, one reason to shop for a good credit card is that a bad one can be very bad, indeed. Penalty fees for late payments have more than doubled in the last 12 years, from an average of $13 in 1995, to $28 this year, with some as high as $39. And after just one late payment, cardholders can get hit with a penalty interest rate as high as 32 percent.
In addition, many cards still employ a practice called universal default which allows credit card
issuers to boost your interest rate if cardholders make late payments on other accounts, such as car loans, mortgages, or other credit cards. Fully 28 percent of CR’s survey respondents who were paying the highest interest rates (more than 25 percent) reported that their rate had increased due to a universal default clause.
CR’s survey respondents also reported wide differences in how their card issuers treated them when something went wrong. Overall, 27 percent of respondents who called customer support reported trouble in obtaining help from a customer representative. Problems included unreasonable waits, difficulty navigating voice systems, or having to make multiple calls to speak to several staffers.
• If you pay your card off each month: Look for one with no annual fee. The interest rate will be of less concern.
• If you run a balance: Make getting a low interest a priority. Use CR’s ratings to identify a credit card with a low interest rate.
• If you want the fewest hassles: Head to a credit union. In addition to providing lower interest rates and superior customer service, they might offer the same kind of reward programs as other cards.
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