Small banks, credit unions have lower credit card interest rates than big banks, feds say

Ben Dennis
·2 min read

WASHINGTON (DC News Now) — A recent report signals consumers should avoid the big banks when taking out a new credit card if they want to avoid steep interest rates.

The Consumer Financial Protection Bureau (CFPB) said customers can get lower rates by 8 to 10 percentage points by shopping at small banks, compared to the 25 largest credit card issuers, according to a report published last month.

The CFPB said small bank rates can offer $400 to $500 less in interest accrued for average cardholders.

“This is regardless of your credit score,” said Herb Weisbaum of the Consumers’ Checkbook

“It’s going to take a little shopping around. But if you’re going 28 percent annual percentage rate interest… to 18 percent, it’s worth doing a little bit of searching around. That can save you a fair amount of money,” Weisbaum advised.

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Why may the report be so important? It could offer a chance to pay down debt faster if you need to make new purchases and consider a new card.

A recent study from WalletHub said it takes 15 months in DC to pay off median credit card debt, almost 14 months in Virginia and 13 months in Maryland.

While paying cards off fully also avoids paying interest, certain balance transfer cards can help you deal with debt over time.

“That could buy you 18 months to 24 months to pay that debt down and get it over with,”
said Weisbaum.

Ted Rossman, a senior industry analyst at Bankrate, says consumers can consider low interest credit cards for a period of time to tackle certain expenses, saying, ” if maybe you’re looking to spread out the impact of a home renovation, let’s say, or a big furniture or electronics purchase. Those 0% offers are widely available.”

There is free counseling to pay off your debt: visit The National Foundation for Credit Counseling to create an online profile to budget your expenses, credit and savings.

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