Disclosures on credit card applications improve, study finds

We here at WalletPop tell you over and over again to read the fine print in anything you receive from your credit card company, but a new study aimed to figure out just how forthcoming card companies are before you even get to the fine print. Website CardHub.com evaluated credit card applications from America's top 10 issuers to discover if you know what you'll be getting yourself into before you start squinting or have to pull out a magnifying glass.

"It's improved relative to what it used to be," Odysseas Papadimitriou, CEO and founder of CardHub.com, told WalletPop in a phone interview. Motivated by a combination of regulatory changes and consumer demand for easy-to-understand information, issuers today are responding by being more up-front about things like rates and fees.

Previously, Papadimitriou says, card companies would often hide behind language like, "rates as low as x." Now, he says, more companies are disclosing the actual rate ranges without making the customer go hunt for them in the fine print. Overall, in the study, Capital One came in first for the quality of its disclosures, while Bank of America was second. (Bringing up the rear was U.S. Bank.) The full report, as well as the list of all the banks CardHub studied, can be found here.

Card companies have done the best when it comes to improving their disclosures about the annual fees their products carry. But they've fallen short when it comes to information about balance transfers. Papadimitriou says both rates and fees for balance transfers aren't explained as well as they should be in many cases. "For a lot of people, especially people who are newer to balance transfers, the concept of a balance transfer fee might be something they're not aware of, or it might not be top of mind for them," Papadimitriou says.

Another fuzzy area for many was spelling out exactly how much non-cash rewards points or miles are worth in objective terms. (Credit card experts we've encountered almost always prefer cash-back reward cards for this reason: There's no guesswork to figure out the value of your reward.)

While the CARD Act is certainly responsible for a certain degree of this shift, Papadimitriou says issuers are also motivated by their own interests. (What, you didn't think they were doing it out of the goodness of their hearts, did you?)

"Tricking the customer into applying for a credit card was just creating adverse selection from them. The ones who keep the card are kind of desperate," says Papadimitriou. "You trick the customer, and the ones that stay with you are the ones who don't have any other options."
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