Tuesday, August 30, 2011

Consumers, credit cards grow more comfortable with each other

Credit cards are making a modest comeback. Consumers are inquiring more about opening accounts, bankers have raised their limits slightly, delinquency rates are easing and the number of open accounts is on an upward path, reports the Federal Reserve Bank of New York.

The credit-card landscape is changing in other ways, too. Here are some current themes:

- Russ Wiles


Heightened card use comes despite a higher level of interest rates. The average advertised rate on cards is 14.2 percent, reports LowCards.com. That's up from 11.6 percent in May 2009, when the federal CARD Act took effect, though it's unchanged from early 2011.


After a sharp drop in 2009, customer satisfaction with credit cards has increased two years in a row, says J.D. Power and Associates. Satisfaction has risen to 731 from 714 last year on a 1,000-point scale that examined terms, rewards, problem resolution and more. American Express got the top score, followed by Discover Card, Barclaycard and Chase.


Card companies offer various perks that consumers often aren't familiar with. Common benefits include rental-car insurance, protection against unauthorized charges, travel-accident and trip-cancellation insurance, lost-luggage insurance and roadside assistance. There are also extended warranties and, typically, some protection if an item that you buy gets lost, damaged or stolen.


Airline cards, in particular, are offering more special rewards such as bonus miles, free checked bags and free passes to airport lounges, says LowCards.com, which cites the Mileage Plus Explorer Card from United Airlines/Chase and the Executive AAdvantage World Elite MasterCard from Citi/American Airlines as examples (though the latter charges a $450 annual fee).

A CardHub.com study found travelers save money when making purchases in other nations using credit cards. On average, cards were 7.9 percent cheaper compared with what banks charge to change money and 14.7 percent less costly than airport currency services.


In the J.D. Power study, satisfaction improved partly because consumers said they noticed fewer recent rate hikes and had a better understanding of terms - both likely consequences of the CARD Act.

But another result is that most credit cards have switched from charging fixed to variable interest that, typically, is pegged to bank prime lending rates. If interest rates in general start to rise, card borrowing costs will increase, too, and quickly.

by Russ Wiles The Arizona Republic Aug 26, 2011

Consumers, credit cards grow more comfortable with each other

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