Do a Background Check on Your Credit Card Company

Michael Filighera learned the hard way when he signed on for a credit card from Household Bank a year or two ago.

A 53-year-old former financial markets trader in San Francisco, Filighera knew enough to read the fine print in his agreement. "The information was clearly written, so I thought they were good," Filighera said. But he ended up discovering about a year later that he'd been paying a 27.99% rate on a card that he'd thought was only 19%. Now he's even more careful about screening his credit card companies.

Lawmakers are scrambling to address the problem. On Dec. 4, the Senate Committee on Homeland Security and Governmental Affairs had a hearing about unfair interest rates. The following day, Democratic senators Ron Wyden of Oregon and Barack Obama of Illinois introduced the Credit Card Safety Star Act of 2007, which would rate the consumer-friendliness of cards.

"It's always been an issue, but now people are more worried," said Mandy Walker, a senior editor at Consumer Reports in Yonkers, N.Y., which is published by the nonprofit consumer advocacy group Consumers Union.

There are ways to screen credit-card companies. The Better Business Bureau offers information such as the size of a credit-card company's staff, when it was incorporated and whether it's a BBB-accredited business. The site also says how many and what kinds of complaints the BBB received about any given company in the last 36 months. For example, a peek at Washington Mutual's(WM Quote) data on this site shows that the bank has an "unsatisfactory record" with the BBB due to unanswered complaints.

Washington Mutual declined to comment on the BBB results, but a spokeswoman noted that this year, J.D. Power and Associates named the company Best in Customer Satisfaction in banking.

It's also possible to learn which companies have the strongest customer service records in the business. In October, Consumer Reports published the latest results from its National Research Center survey of more than 36,000 readers about their interest rate, bill-timing and problem-resolution experiences with their credit cards.

J.D. Power and Associates offers a second opinion with its 2007 Credit Card Satisfaction Study. Note that J.D. Power didn't include the credit unions, which had topped the Consumer Reports list, because they aren't included in its banking practice.

If a credit card comes from an industry leader, that doesn't necessarily mean it's the best. Consumer Reports found that USAA Federal Savings, which issues cards branded by American Express(AXP Quote) and MasterCard(MA Quote), earned a reader score of 95 out of a possible 100, implying that almost all customers were satisfied. Capital One(COF Quote), JPMorgan Chase(JPM Quote), HSBC, Bank of America(BAC Quote) and Citigroup's(C Quote) Citibank had satisfication ratings that ranged between 71 and 75, making them impressively mediocre on customer service considering that they collectively control about 80% of the market nonetheless. A score of 60 means that customers were fairly well satisfied.

Michael Filighera might have used that information before getting his credit card from Household Bank, a unit of HSBC. HSBC declined to discuss information about specific customers, citing privacy laws. But Cindy D. Savio, a company spokeswoman, says the firm is "committed to delivering a positive card experience for its customers;" Citibank and Chase Card Services expressed similar sentiments.

"Customer satisfaction -- and a card's overall value to the customer -- includes many elements, such as the ability to earn and use rewards," said Chase spokesman Paul Hartwick.

Capital One and Bank of America didn't respond to requests for comment.

It's also possible to get information on which companies will satisfy your individual needs, pointed out Linda Sherry, the director of national priorities at the nonprofit group Consumer Action in Washington, D.C. For example, early this year, Sherry wanted a card that wouldn't charge her any currency-conversion fees when she used it abroad. She signed up with Capital One, the only company she could find that offered such a card. Compare credit card offerings on Consumer Action's Web site.

Still need more information? Questions about any credit card issuer can be posted on Consumer Reports' discussion forum.