The Consumer Financial Protection Bureau (CFPB) has launched a new tool to help you make smarter choices when it comes to credit cards. If you have ever felt tricked by unclear rewards terms or sky-high interest rates, you are not alone. This tool aims to change that by offering you a transparent way to compare credit card options.
What is the CFPB explore credit cards tool?
The Explore Credit Cards tool is a free online resource designed to simplify the credit card selection process. It uses open data to provide side-by-side comparisons of over 500 credit cards. You can filter options by:
- Credit score requirements
- Annual percentage rates (APRs)
- Fees, including annual and late fees
- Rewards programs
This tool helps you make better decisions by clearly showing the costs and benefits of each card, empowering you to choose one that aligns with your financial goals.
How does this tool protect you from scams?
The CFPB has raised concerns about deceptive practices by some credit card companies. These include:
- Devaluing rewards points and airline miles without notice.
- Using vague or confusing terms about how to earn or redeem rewards.
- Imposing excessive fees for services like paper statements.
CFPB Director Rohit Chopra explained, “Large credit card issuers too often play a shell game to lure people into high-cost cards, boosting their own profits while denying consumers the rewards they have earned.”
The Explore Credit Cards tool exposes these practices by letting you compare real data, helping you avoid cards with hidden traps.
Why smaller issuers may save you more money
If you usually go for big-name credit cards, you might be overpaying. A CFPB study revealed that the 25 largest credit card issuers charge interest rates 8 to 10 percentage points higher than smaller banks and credit unions. This difference could cost you $400 to $500 per year in interest alone.
Smaller issuers are often overlooked, but they frequently offer lower rates and better terms. By including these lesser-known options, the CFPB’s tool promotes competition and ensures you can see the full range of available offers.
Read more: What is a good credit score? How to check and improve yours
What makes retail credit cards so costly?
Retail credit cards can seem tempting with their in-store discounts, but they come with some of the highest interest rates. The CFPB found that:
- 90% of retail cards had maximum APRs above 30%.
- Many private-label cards charged fixed APRs, meaning all cardholders paid the same high rate regardless of their creditworthiness.
- Some large retail card issuers added costs by charging for paper statements.
If you have a retail credit card or are considering one, the Explore Credit Cards tool can help you find better alternatives.
How to use the CFPB tool to save money
Getting started with the Explore Credit Cards tool is easy. Here is how you can use it effectively:
- Visit the CFPB website to access the tool.
- Filter cards based on your credit score, desired rewards, and fee preferences.
- Compare options to identify which card offers the best overall value.
- Look beyond the big names to explore smaller issuers and credit unions.
By taking these steps, you can avoid falling for flashy rewards programs that might cost you more in the long run.
This new tool is a game-changer for anyone looking to save on credit cards while steering clear of scams. Take advantage of it today to make informed financial decisions.
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