Large banks charge higher credit card interest rates and fees than small banks and credit unions, survey finds

Compare interest rates and terms when you’re going to sign up for a new credit card. There’s no need to pay 28 to 30 percent interest or an annual fee of $150.

Large banks are offering worse credit card terms and interest rates than small banks and credit unions, regardless of credit risk, according to a report by the Consumer Financial Protection Bureau.

The 25 largest credit card issuers charged customers interest rates of 8 to 10 points higher than small- and medium-sized banks and credit unions. This difference can mean $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,” said Rohit Chopra, director of the CFPB.

The survey included information on all general-purpose credit cards of the largest 25 credit card issuers in the United States. It also included a representative sample of credit cards from small- and medium-sized banks and credit unions across the country.

Among 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 percent for large issuers and 18.15 percent for small issuers.
• Fifteen issuers reported credit cards with interest rates above 30 percent: Nine of the largest credit card issuers in the country reported at least one credit card with a maximum purchase annual percentage rate or APR of more than 30 percent. Many of these high-cost credit cards 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 percent carried an annual fee, compared to 9.5 percent of small firms. The average annual fee was $157 for the largest issuers, as opposed to $94 for smaller issuers.

More than 190 million consumers have at least one credit card with credit card debt and spending reaching record levels at the end of 2022. Debt surpassed $1 trillion, and spending reached $846 billion.

Chopra said with more than $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.

Comments

[azire]

Along with usually offering the lowest interest rates on CDs, savings, etc.

[Rita]

Yes, but if you compare prices, you know about that.