If you're shopping around for a new credit card, you might be tempted to think all cards are created equal — equally good or equally bad, depending on your perspective. After all, they all allow you to pay with plastic, charge interest if you carry a balance, and hit you with penalties if you mess up on payments. Card to card, what could be different?
Plenty, according to the latest survey of 36,300 Consumer Reports readers, who collectively hold nearly 62,000 cards and answered questions about problems related to interest rates, billing, and customer service.
The complete results are available online here, though a subscription is required to view details — including the ratings.
The best of the bunch? Topping the list, as it often does, was USAA, available to members of the military, retirees and their families. Scoring almost as well (cardholders were "very satisfied") were cards issued by a group of credit unions, two retailers (Cabela's and Nordstrom), American Express and Discover.
Results were much less inspiring for cards issued by some of the nation's leading credit-card banks.
Consumer Reports put it this way: "The nation's five largest MasterCard and Visa issuers — JPMorgan Chase, Bank of America, Citibank, Capital One, and HSBC, which control almost 80 percent of the Visa and MasterCard market — all had undistinguished scores. More of our readers who used those banks' cards complained that they were assessed unfair late fees or experienced unexpected interest-rate increases than did readers who held cards from the top-rated issuers. And none of them was exceptional at resolving problems."
Overall, the five worst scorers were JP Morgan Chase, MBNA, Capital One, Direct Merchants, and, at the bottom, Providian.
Credit-card trickery remains a problem, despite pressure from advocates and lawmakers. On that subject, Consumer Reports quotes a GAO study and a report from a California advocacy group, Consumer Action:
A September 2006 Government Accountability Office study also noted new hidden fees, such as charges for making payments over the phone, which can range from $5 to $15, even when the payments are on time.
In addition, many lenders play tricks when calculating what you owe. Some will keep the interest clock ticking from the time they calculate and mail your bill until they receive your payment. If you've been carrying a balance and try to pay the bill in full, you'll find you still owe interest for that additional period. Then there's the old trap called double-cycle billing, which lets you avoid interest charges only if you have paid your two previous balances in full.
When Citibank announced earlier this year that it would eliminate a nasty practice called universal default, there was some hope among consumer groups that other issuers would follow suit. Universal default allows the issuer to boost your interest rate if you make late payments on other accounts, such as car loans, mortgages, or other credit cards, even if you have a spotless repayment history on that particular card.
But Consumer Action's survey, issued in May, noted that many cards still employed universal default. "And if you carefully read the change-in-terms section of most disclosure statements, most say that the issuers can change the terms of the cardholder's agreement at any time for any reason, language that amounts to the same thing as universal default," says Ruth Susswein, deputy director of national priorities for Consumer Action. "There is no other contract in the world that can change its terms at any time."
Consume Reports said its survey "found evidence of the damage that universal default can inflict on cardholders. Fully 28 percent of our readers who were paying the highest interest rates (more than 25 percent) reported that their rate had increased due to a universal-default clause."
The bottom line: Pick a card carefully. Read the terms. Then watch your bills like a hawk. If you use the card for convenience, paying charges on time and in full, you're probably OK with most cards. But if you ever carry a balance, you're at risk of paying an extra, unexpected price.
If that happens, all you can do is complain to the issuer (which sometimes will get charges reversed "as a courtesy"), complain to bank regulators, or find a new card. You'd do better to choose a card carefully in the first place.
