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J.D. Power: Growing numbers dissatisfied with credit cards

American Express most pleasing to cardholders, followed by Discover

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It's confirmed: Rising interest rates, higher late payment fees, painful and sudden cuts to total available balances and seemingly arbitrary cancellations of entire accounts are infuriating immense numbers of credit card users.

J.D. Power survey finds growing dissatisfaction with credit cards
The survey found average card satisfaction fell to a record low of only 703 on a 1,000-point scale.

The 2009 J.D. Power and Associates credit card satisfaction survey, released Tuesday, found that overall credit card satisfaction plunged to a record low -- only 703 on the 1,000-point scale. The drop of 80 points since last year brought the index to its the lowest mark since the annual surveys began in 2007.

If this continues, they'll have to rename the thing, adding a "dis" to the beginning of the term "satisfaction survey," an addition that reflects the way many credit card users believe they are being treated.

"Obviously, this says a lot about the challenges that the credit card industry faces," said Michael Beird, director of banking services at J.D. Power and Associates. "The consumers have spoken."

For what it's worth, though, you do have a better chance of a satisfactory experience if you carry an American Express card or have a Discover card account. American Express topped the rankings and Discover came in second in 2007 and 2008.

"We are honored to be recognized for customer satisfaction by our card members for the third year in a row, particularly given these challenging times," said Jud Linville, chief executive officer and president of consumer services for American Express. "We have had to make tough decisions over the past year in response to the business and economic environment and we know our card members have also been making tough decisions." 

Carlos Minetti, executive vice president of Discover's card member services and consumer banking, praised his colleagues for their efforts on behalf of customers. "Discover has always been committed to delivering high-quality customer service that puts card members first," he said.

But even here, there was some cause for concern. American Express' satisfaction rate fell from 783 last year to 762 this year, though Discover's satisfaction rate remained steady at 751.

Officials of Bank of America, which placed 10th on the list of 18 top credit card issuers, with a score of 687, said its employees are rededicating themselves to improving customer relations.

 "We're disappointed in the survey results and are committed to providing a positive customer experience," said Betty Riess, a Bank of America spokeswoman .

She said her firm has been particularly active in tightening security procedures and in helping customers improve their financial literacy. "For three years in a row, Bank of America has ranked first among the top card issuers in Javelin Strategy & Research's annual Card Issuers Identity Safety Scorecard," Riess said.

Rates, fees dissatisfy
Industrywide, the sharp declines were led by dissatisfaction over fees and rates, with that score falling to 603, down 37 points from last year, J.D Power reported.

Nearly one in five of the surveyed credit card users reported being hit with an increase in their interest rates this year, almost twice the percentage that endured that blow in 2008. It was worse for people who carry a balance from month to month. Nearly one-fourth of these so-called "revolver" accounts reported increases in credit card interest rates.

The results roughly correspond to a CreditCards.com national telephone survey conducted in June 2009. That survey found that 40 percent of credit cardholders reported they were hit with punitive action by a card issuer sometime in the past year.

There's more.

Eighty-nine percent of credit card users who experienced changes to their credit lines (generally speaking, that means their lines were reduced) said they were never notified of the moves by their credit card issuers. That's not surprising -- while consumers may desire such notification, the governing federal rule on the topic, Regulation Z, does not require advance notice of credit limit reductions. 

Obviously, this says a lot about the challenges that the credit card industry faces. The consumers have spoken.

-- Michael Beird   
J.D. Power and Associates   

In addition, about 14 percent of the respondents said they were charged late payment fees, compared to 11 percent last year. Late payment fees, according to the survey's authors, tend to have the greatest impact on the rates of satisfaction -- or, in this case, the rates of dissatisfaction.

"Overall satisfaction declines 86 index points when a customer incurs a late fee," Beird said.

Alas, nearly the only thing that stayed the same was this: Overall satisfaction among credit card users remains the lowest across nearly the entire field of financial services, including insurance, banking and investment services.

"At 703, the credit card industry has a long way to go to get up that ladder," Beird said.

The survey of more than 9,000 credit card users was conducted in May and June of this year. It measured responses to six important factors: fees and rates, interactions between the user and issuer, billing and payment processes, rewards, benefits and services, and the resolution of problems. Comparisons of the results to those of prior years take into account a recent change in methodology and are statistically accurate, Beird said.

Nearly every insight revealed by the latest study indicated declines in satisfaction so profound that they raised questions about the efficacy of the Credit CARD Act, a sweeping set of credit card reforms that began taking hold in August.

Under the law, consumers now must receive 45 days of notice before rates and certain other changes to their accounts can take effect, they must get at least 21 days to pay their bills, and they have the right to opt out of interest rate and fee hikes if they are willing to cancel their accounts and payoff their balances.

Connecting with consumers
But that might not be nearly enough to alter the trend, Beird said, unless both the industry and its customers become far more proactive.

"It's important to note that 53 percent of customers are unaware of the current APR on their cards, despite the APR being disclosed on their statements every month," he said. "Unless issuers do more than simply follow the regulations, customers will likely not be any more satisfied.

"Communicating and actually connecting with customers with the same intensity used to acquire customers in the first place -- rather than just complying with regulations -- is critical to customer satisfaction."

For instance, the survey found that when interest rates are hiked, satisfaction scores are an impressive 97 index points higher when customers are notified in advance.

How to get satisfaction

To improve overall satisfaction with credit card issuers, consumers should take the following steps:

  • Compare the performance of credit card issuers.
  • Make sure you are getting a card with the features and benefits that are important to you and that fit how you plan to use the card. For instance, if you plan to carry a balance on the card, find one with the lowest rates and fees. On the other hand, if you use the card to pay for everything from gas to groceries to vacations and pay off the balances each month, you may want a card with a rich and flexible reward program.
  • Educate yourself on the benefits and services available on the card and use them. Customers who are both aware and take advantage of card features are more satisfied than those who don't.
  • When there's a question about the appropriateness or accuracy of a fee or rate, request that it be waived or adjusted. Issuers will fix mistakes on their part and sometimes are willing to make accommodations for valued customers.

If you can't get satisfaction from your issuer, file a complaint with the appropriate credit card regulator.

     

Satisfaction's sources
Those and other considerate business practices seemed to be among the keys for American Express, Discover and other companies that fared relatively well in the survey.

American Express received high marks for communicating with its customers about the benefits, services and billing processes associated with its cards.

"We will continue to focus on what our customers want," said Linville, the company's president of consumer services. "For us it is about building customer loyalty and we are deeply appreciative of the vote of confidence we received today."

Discover scored well in the design, accessibility and utility of its website, and in its relatively swift response to phone inquiries -- racking up an average wait time of only 3.3 minutes before a customer service representative comes on the line.

"Receiving the highest score in the 'interaction factor' from J.D. Power and Associates is a reflection of the incredible dedication of our customer representatives who work tirelessly to help our card members achieve a brighter financial future," Minetti said.

But, as in most things, people on both sides of the equation must contribute to the relationship if it is to develop satisfactorily.

"The advice is be an educated user," said Beird, of J.D. Power. "Don't wait for the card issuer to notify you. Use the channels of communication that they have established and find out for yourself.

"Sign in online, which is the No. 1 chosen channel of most users, and educate yourself. There is just no reason for consumers not to educate themselves about their own credit cards."

See related: CreditCards.com survey: Two of every five cardholders punished in past year by issuers, Comprehensive, interactive guide to Credit CARD Act, Credit card users beware: The terms, they are a'changing

Updated: September 1, 2009


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