The perils of credit cards

BY CONSUMER REPORTS Modified: October 20, 2010 at 12:02 pm •  Published: October 19, 2010
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With the protections of the Credit Card Act of 2009 in full effect, a nationally representative Consumer Reports survey shows a slightly lower level of dissatisfaction among Americans with their credit cards than last year. However, credit cards remain one of the lowest-rated services CR has ever analyzed; only 45 percent of respondents said they were completely or very satisfied with their cards.

The survey, conducted in July by the Consumer Reports National Research Center and consisting of 1,212 interviews among adults aged 18-plus, also shows that consumers are carrying less credit card debt, with median balances of $3,793 -- $1,100 lower than in 2009.

Despite some positive changes, there is still plenty of peril out there. Among other reforms, the card act bars issuers from raising rates in the first year or on existing balances unless your payment is 60 days late. Banks can still impose annual fees, slash cardholder's borrowing limit, cancel their account without notice, and raise their minimum payment. In CR's survey, 47 percent of respondents complained about such experiences.

BEST AND WORST CREDIT CARDS

CR's money experts surveyed the marketplace and found that none of these nationally available cards limit the amount of points, miles or cash-back consumers can earn. None of these cards charge an annual fee in the first year.

-- Cash-Back Cards (Higher APRs make these rewards cards most suitable for people who pay off balances in full each month): Amazon.com Rewards Visa, American Express Blue Cash, American Express Costco TrueEarnings, Capital One No Hassle Cash Rewards, Chase Freedom, Fidelity Rewards American Express, PenFed Visa Platinum Cashback Rewards.

-- Travel Cards (These cards offer the best deals for frequent travelers): Capital One Venture Rewards, PenFed Premium Travel Rewards American Express.

-- Low-Interest/Fees Cards (For consumers who carry a balance or want to transfer a balance): Iberiabank Visa Classic, PenFed Promise Visa, Simmons First Visa Platinum.

Some of the worst cards with the highest-fees are aimed at people with a poor or limited credit history. These two cards are particularly fee-laden and may be the worst options available:

First Premier Bank MasterCard: This card now advertises a $25 to $95 processing charge (which fluctuates by the minute, depending on when you click on the card's website).

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