What makes a great credit card? Most people look for cards that charge a low interest rate, have a long 0% APR balance transfer offer, or offer great cash back or rewards benefits. Add one more thing to the list: look for the most user-friendly credit cards.
The tightening economy is changing the credit card landscape. Seeking ways to deal with the fall-out from the economic crisis, credit card companies are increasingly passing the baton to cardholders. They are not only tightening lending standards, increasingly cardholders are seeing interest rates on existing cards raised and credit limits slashed. Many credit card companies also have become more trigger-happy, unleashing punitive default rates for seemingly minor transgressions like a late payment or over-the-limit credit card balances.
Still, some credit card companies are more user-friendly than others. A recent study by Consumer Reports rated credit card issuers based on a survey of 36,298 readers’ experiences with 61,944 credit cards. The survey shows that, while credit card terms are largely the same from issuer to issuer, there are considerable differences in how credit card companies enforce those terms.
The study looked at such factors as median APR, whether or not consumers reported interest rate problems in the form of unexpected increases, billing problems, and how willing the company was to work with consumers to resolve problems.
Interestingly, the more high-profile credit card companies were rated the least user-friendly. For example, Citibank, JPMorgan Chase, HSBC, Bank of America, and Capital One (which, together, control almost 80 percent of the Visa and MasterCard market) all ranked towards the bottom of customer ratings-especially in the area of problem resolution. For these issuers, there were also more complaints about unexpected rate increases and unfair late fees.
The most user-friendly credit card companies turned out to be credit unions, with USAA Federal Savings and the Navy Federal Credit Union taking the lead. Credit unions and smaller, independent banks provide their cardholders with more user-friendly credit cards, because unlike other credit card companies, they have to answer to their members, not to stockholders.
What does this mean for you? If there are small banks or credit unions that serve your area, it’s worth checking out the terms of their credit card offerings. For an easy comparison of other credit card offers, also check out our easy Credit Card Comparison Guide.
As for the credit cards you already have, your best defense against a surprise change in terms is to read up on some of the common traps that tend to trigger unexpected late fees and interest rate increases. Of course, the best way to completely steer clear of credit card problems is very simple: pay off your balance on time and in full every month.
