Over the past two days, to big banking regulators, the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC), have each taken steps to help credit card consumers. The Fed introduced a new searchable database of credit card agreements. The FDIC, provided guidance for consumers on how to better manage their credit cards. Even though the Fed's effort is more sweeping, the FDIC's approach might be more effective.
You can play around with the Fed's new database here. It contains hundreds of credit card disclosures. The creation of this accessible file of paperwork was required through last spring's credit card regulation bill. While a valiant effort, it's hard to see how the database changes much. Sure, if you have an Internet connection, you can now search online for your disclosure. But banks, theoretically, already supplied you with that disclosure. And they likely will supply you with another if you lost it (or should be required to if they aren't).
Moreover, the problem isn't really with obtaining these disclosures, but with understanding them. The Fed's effort does nothing to simplify the legalese that stumps so many consumers without any finance training. Even though the Fed's heart was in the right place on this one, it's hard to see how it will have that much impact.
The FDIC's effort is more useful, however. In its most recent consumer newsletter the regulator provides some clear and well-written information for credit card consumers. One part includes a nice narrative summarizing new consumer protections. Another provides eight ways to avoid credit card pitfalls. They include:
- Understand your right to cancel a credit card before certain significant account changes take effect.
- Keep an eye on your credit limit.
- Decide how you want to handle transactions that would put you over your credit limit.
- Be cautious with "no-interest" offers.
- Keep only the credit cards you really need and then periodically use them all.
- Do your research before paying high annual fees for a "rewards" card.
- Take additional precautions against interest rate increases.
- Parents of young adults have a new opportunity to teach responsible management of credit cards.
The webpage contains additional detail on these tips. They're great advice. Some of them might seem like common sense to fiscally responsible consumers, but others might find these tips revelations. These recommendations are especially good because even unsophisticated credit card users should be able to understand the advice that the FDIC provides. That gives this approach a big advantage over the Fed database.