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A new study from the Pew Charitable Trust has found that every one of the credit cards offered by the country’s 12 largest credit card issuers are bad deals for consumers and have practices the Federal Reserve has defined as “unfair or deceptive.”The trusts’ health group’s safe credit cards project report, titled “Still Waiting: Unfair or Deceptive” Credit Card Practices Continue as Americans Wait for New Reforms to Take Effect,” also compared credit union card programs and found them sharply better.“Although credit unions control only a small portion of credit card outstandings, comparisons between credit union and bank product models illustrate options available to consumers and potential benchmarks for future regulatory rulemaking efforts,” the organization said.The observed credit unions presented a distinct alternative to credit card pricing and other practices of the observed banks, the report added.“In July 2009, median advertised interest rates on cards from the 12 largest credit unions were between 9.90% and 13.75% annually, depending on a consumer’s credit profile-approximately 20% lower than comparable bank rates,” the report said. “Meanwhile, credit union penalties were generally less severe than those of banks.”The report came at a time of increased national attention to credit card issues. Upset by ongoing stories about bank card issuers continuing to raise card rates, some members of both the U.S. House of Representatives and the U.S. Senate have announced their support for legislation that would move up the effective date of the most recent credit card law from February 2010 to December of this year.Further, consumer advocates nationwide have been decrying what they have described as a general deterioration in how card issuers have been treating consumers in advance of the credit card law coming into effect.It was in that context that the trust launched the safe credit cards project and updated a study of bank credit card rates and practices that it first did in December 2008. This time, however, and to offer examples of credit cards that were being offered in a way more friendly to consumers, the project included credit union cards as well.The report addressed the ways bank cards fell short and the way credit union cards were better on a number of different points, including interest rates, fees and the way the banks and two credit unions had begun to implement variable interest rates.On interest rates, the report documented the wide spread trend of rising rates across a variety of both bank and credit union cards, but pointed out that credit union card rates remained lower.“In general, the largest credit unions offered lower rates than did the largest banks,” the report said. “Similarly, interest rates for bank cash advances were higher than their counterparts at credit unions. Median cash advance rates ranged from 20.24% to 21.24% for bank cards. For credit unions, median cash advance rates ranged from 10.20% to 13.75%, more than 35% lower than comparable bank rates.”On fees, the report documented that all banks and almost all credit unions had late fees but that credit union late fees were only roughly half of bank fees. Further, about the same numbers of both banks and credit unions applied over limit fees, but most of the credit union fees were fixed while most of the bank fees were tied to the value of the balances.On the topic of the relatively new variable interest rates the report warned of what the authors saw as a growing trend: variable interest rates that only varied on the up side.Under the new card law, credit card issuers can issue cards with interest rates that are pegged to an objective, widely promulgated interest rate index, such as the Federal Reserve’s prime interest rate.The report drew attention to card issuers with variable rates that carry an interest rate minimum if the prime falls. In other words, variable rates that can only really go up from a minimum.The trust report argued that these sorts of cards, even though they carry an ostensibly variable rate, really do not do so for the purposes of the law and should be treated as fixed-rate cards for three reasons.“First, these accounts do not provide for changes ‘according to operation of an index.’ Furthermore, by placing a minimum fixed floor against which the index cannot operate, the issuer has exercised control over the index in a way that contradicts the law’s requirements,” the report contended. “Finally, accounts with minimum rate requirements do not justify an exception allowing rate increases on outstanding balances because they allow issuers to expose cardholders to risk of higher rates if the index rises while limiting cardholders’ ability to benefit if the index falls,” the report concluded.–[email protected]

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