Credit card data: Small issuers offer lower rates

The CFPB regularly surveys and collects information on credit card terms from over 150 issuers of all sizes across the country as required by the law . The CFPB’s analysis of this credit card data found:

• During the first half of 2023, small banks and credit unions tended to offer cheaper interest rates than the largest 25 credit card companies across all credit score tiers.
• The difference in reported Purchase Annual Percentage Rate (APR) between the largest and small issuers translated to average savings of $400 to $500 a year for a consumer with an average balance of $5,000 using a small bank or credit union’s card.
• Nearly half of the largest credit card issuers reported offering cards with a maximum purchase APR over 30%.
• Products offered by large issuers were three times as likely to include an annual fee than those at small institutions. The average size of annual fees for the largest issuers was approximately 70% higher than at small institutions.

The CFPB’s latest survey includes data on 643 credit cards from 156 issuers (84 banks and 72 credit unions) offered from January through June 2023. 430 cards were available nationally, while the remaining were only offered regionally or in a single state. The CFPB collected information on all general-purpose credit cards with the largest 25 credit card issuers in the U.S. as well as a representative sample of products from small and medium-sized banks and credit unions across the country. The information includes data on Purchase APR, which is the interest rate issuers charge on purchases when consumers carry a balance.

Small issuers’ median APRs are significantly lower than the largest institutions’ rates

During the survey period, the reported Purchase Annual Percentage Rate (APR) spread between the largest (top 25) and small issuers across credit tiers was between eight to 10 percentage points. Even though some of the largest issuers market credit cards to subprime borrowers, consumers in the highest credit score tier also saw an eight percent difference on interest between large and small institutions. Small issuers include federal credit unions, which have a statutory interest rate cap currently set at 18 percent. However, excluding credit unions, small bank issuers also tended to price APRs lower than larger bank issuers.

For a consumer with an average balance of $5,000,¹ this APR difference would mean $400 to $500 in savings a year for using a credit card issued by a small bank or credit union as opposed to the largest issuers. This difference likely translates to billions of dollars in additional interest revenue for the country’s largest credit card issuers.

Median Purchase APR by Credit Tier ²

Throughout the first half of 2023, several financial institutions, particularly large issuers, reported offering products with notably high APRs. A total of 15 issuers—including nine of the largest credit card issuers in the country³—reported at least one product with a maximum purchase APR over 30%. Notably, many of these high-cost products were co-branded cards offered through a retail partnership.

Credit Card Issuers Pricing Over 30%⁴

*Indicates an institution not in the top 25.

In general, large institutions were more likely to charge annual fees than small institutions and credit unions, with 27% of large issuers’ card products charging an annual fee compared to just 9.5% of small firms. Large institutions’ annual fees were also higher than at smaller banks and credit unions, averaging $157 as opposed to $94 for smaller issuers.

Lack of competition likely contributes to higher rates at the largest credit card companies

CFPB research has found high levels of concentration and evidence of practices that imply anti-competitive behavior in the consumer credit card market. As we noted in 2023, the top 30 credit card companies represent about 95 percent of credit card debt, and the top 10 dominate the marketplace.⁵ We discovered and reported that about half of the largest credit card companies simultaneously stopped sending payment information to the credit bureaus, making it harder for consumers to find better deals. Companies further distort the credit card shopping experience by providing incentives to comparison websites⁶ that might promote more expensive products over cheaper alternatives. We also have concerns about the ways high interest rate products drive consumers into persistent debt. These concerning tactics may limit price competition, prop up higher rates for consumers carrying a balance, and have the potential for harm.

While products offered by smaller issuers may not show up when consumers look for a new card online or in their mailbox, consumers can often find relatively cheaper credit products at smaller banks or their local credit union. Most smaller credit card issuers are not required to participate in our survey, however, they can voluntarily contribute data to allow consumers to compare their products with those offered by larger institutions. Consumers looking for a new credit card can use our data to compare different institutions’ product offerings, recognizing that the exact terms of a card can change. Researchers and other industry stakeholders can likewise explore the CFPB’s updated credit card data webpage and comprehensive datasets. We will continue to report its expanded credit card data every six months.

The stakes are high for the millions of Americans who swipe, tap, or input their credit card information online. Ensuring that consumers can obtain attractive rates can save billions of dollars for households. The CFPB is working on a number of fronts to jumpstart competition in the credit card market, including the development of rules to promote consumers’ freedom to switch providers, addressing loopholes that obscure upfront pricing, taking enforcement actions against illegal rewards conduct, and scrutinizing comparison websites for deceptive design and business practices.

Footnotes

1. At the end of 2022, the average cardholder carried $5,288 in total credit card debt. See CFPB, “The Consumer Credit Card Market,” (Oct 2023) at pg. 33 available at https://files.consu merfinance.gov/f/documents/cfpb_consumer-credit-card-market-report_2023.pdf .
2. Reflects all variable rate cards’ reported median purchase APR for each credit tier.
3. Large institutions are defined as the top 25 credit card issuers in the country. Small institutions are the rest of the TCCP sample.
4. Includes all institutions which reported at least one product with a maximum purchase APR over 30%. Includes variable and fixed rate cards.
5. See CFPB, “The Consumer Credit Card Market,” (Oct 2023) at pg. 18 available at https://files.consu merfinance.gov/f/documents/cfpb_consumer-credit-card-market-report_2023.pdf .
6. See CFPB, “The Consumer Credit Card Market,” (Oct 2019) at pg. 74 available at https://www.consumerfinance.gov/data-research/research-reports/the-consumer-credit-market-2019/