Is a credit card your friend or foe? Well for many Americans, the answer is the latter. And even though I operate a website that advertises credit cards, I think consumers are perfectly justified in feeling that way considering the outrageous APRs, fees, and outsourced customer support that have become the norm these days.
However for some reason, the number of complaints against credit card companies is dropping. On Tuesday the Federal Trade Commission released their list of the top complaints for last year; credit cards dropped from 7th to 10th place, with nearly 26% fewer complaints filed when compared to the year prior.
Is the drop due to the reform… or not?
When I saw the news, the first thing that popped in my mind was that the improvement must be attributed to the Credit CARD Act of 2009. After all for personal credit cards, interest is now tallied in a more transparent way, universal default is a thing of the past, and a single late payment is no longer grounds for a rate hike (which were previously some of the top complaints on Credit Card Forum).
However I may have been premature in that assumption. According to this post by CreditCards.com, it’s unknown whether the reason for the improvement is due to reform. The article states that David Torok, whom is the director of the FTC’s division of planning and information, points out that it’s difficult to say why the number of complaints went down. It may only be because fewer people took the time to file a formal complaint.
Meanwhile on the other side of the fence, there are a number of consumer advocates (including Rep. Carolyn Maloney whom originally introduced the Act in the House of Representatives) that believe the drop in credit card complaints is a clear indication that the reform is working.
After considering both sides, I am leaning more towards David Torok’s conclusion that as of right now, it really is an unknown as to what caused the change. Yes, the reform was a long overdue set of rules and regulations that has indeed positively benefited us all. However at the same time, it opened up a new can of worms – banks retaliated by socking almost everyone with higher interest rates and new fees (problems which we know nothing can be done about, and hence, complaints aren’t filed for them). Furthermore, I know firsthand that consumers nowadays are also using creative strategies like social media to try and tackle their credit card complaints.
Will the trend continue?
A year from now – March 2012 – will the numbers be lower or higher than they are today? To be perfectly honest, I am hesitant making a prediction. Will the Durbin Amendment lead to banks implementing a $100 spending cap on debit cards? (NerdWallet did a great job covering the pitfalls, by the way.) If that happens, many debit card users may flock to credit cards, which is not necessarily a good thing… some people are better off sticking with debit if it keeps their spending in check. That shift could lead to spending problems, and in turn, more complaints.
I can also see some reward programs potentially becoming problematic over the next year or two. If chaos in the Middle East continues and oil prices keep skyrocketing, you can bet that travel credit cards will do all they can to water down their airline rewards, in an attempt to offset the higher costs associated with them.
How do you feel?
Are you more or less satisfied with how your credit cards have been treating you over this past year?
Disclosure: My company’s website Credit Card Forum advertises credit cards. Therefore I have direct and/or indirect financial ties to some credit cards.