WASHINGTON, D.C. —In its newly updated “Terms of Credit Card Plans” survey, the Consumer Financial Protection Bureau (CFPB) said it has found that large banks are offering worse credit card terms and interest rates than small banks and credit unions, regardless of credit risk.
“In fact, the 25 largest credit card issuers charged customers interest rates of eight to 10 points higher than small- and medium-sized banks and credit unions,” the CFPB said, adding it found more than a dozen issuers with APRs above 30%.
The Bureau added the difference can translate to $400 to $500 in additional annual interest for the average cardholder.
“Our analysis found that the largest credit card companies are charging substantially higher interest rates than smaller banks and credit unions,” CFPB Director Rohit Chopra said in a statement. “With over $1 trillion in credit card debt outstanding, the CFPB will be accelerating its efforts to ensure that consumers can access better rates that can save families billions of dollars per year.”
25 Largest Issuers
The survey data include information on all general-purpose credit cards of the largest 25 credit card issuers in the United States, according to the Bureau, which said the data also include a representative sample of products from small- and medium-sized banks and credit unions across the country.
Key Findings
Among some the survey’s key findings:
- Large issuers offered worse rates across credit scores. “Whether a person has poor, good, or great credit, large issuers offer higher interest rates. For example, the median interest rate for people with good credit – a credit score between 620 and 719 – was 28.20% for large issuers and 18.15% for small issuers,” the CFPB said.
- Fifteen issuers reported credit cards with interest rates above 30%. “Nine of the largest credit card issuers in the country reported at least one product with a maximum purchase annual percentage rate (APR) over 30%. Many of these high-cost products were private label or co-branded cards offered through retail partnerships.”
- Large issuers were more likely to charge annual fees. “Among large issuers’ credit cards, 27% carried an annual fee, compared to just 9.5% of small firms. The average annual fee was $157 for the largest issuers, as opposed to $94 for smaller issuers.”
Goal to Increase Competition
According to the CFPB, the newly updated Terms of Credit Card Products survey is one part of the CFPB’s efforts to increase competition throughout the credit card market.
“The CFPB is promoting switching through open banking, scrutinizing bait-and-switch tactics on credit card rewards, closing loopholes that allow credit card issuers to extract junk fees, and promoting credit card comparison shopping,” the Bureau said in a statement.
It noted that in October 2023, it also published its biannual consumer credit card market report.
“The report noted that more than 190 million consumers have at least one credit card. The report also stated that both credit card debt and spending reached record levels at the end of 2022. Debt surpassed $1 trillion, and spending reached $846 billion,” the Bureau said.
Statement From America's Credit Unions
“The CFPB’s new report on the credit card market clearly shows the credit union difference: Credit unions offer more affordable credit solutions to Americans than the largest issuers," said America's Credit Unions' President and CEO Jim Nussle. "With better rates and lower annual fees on average, consumers can more easily achieve their best financial lives when they partner with a credit union. This report highlights the importance of allowing credit unions to serve all Americans because big banks clearly aren’t. We will continue to fight for field of membership reforms and other policy improvements to ensure consumers’ access to credit unions and their superior offerings.”
Additional Releases Coming
The CFPB said it will continue to release data on credit card pricing and availability every six months, with the next release slated for later in spring 2024. The CFPB is developing a consumer-facing tool that, once finished, will give people looking for a new credit card an unbiased way to compare credit card terms and interest rates.
Read the CFPB’s data spotlight on the agency’s Terms of Credit Card Plans survey.