Survey finds improving picture for credit-card holders

Things are looking better for the finances of credit-card holders this year, according to a new survey by the Consumer Reports National Research Center. Consumers are paying down their balances and facing fewer punitive actions by credit-card companies, such as higher rates, late payment fees, and canceled cards.

And with reports of credit-card delinquencies and defaults down, issuers are back to stuffing mailboxes with offers for new cards, many of them featuring lucrative rewards. Mintel Comperemedia, a research company that tracks direct marketing, reports that 23 percent of credit-card offers from January 2011 to April 2011 included an additional cash incentive, compared to just 1 percent during the corresponding period in 2007. In addition to those bonuses, some card issuers are offering low introductory interest rates on purchases and balance transfers.

But watch out—some of those rewards offers have gotchas buried in the fine print that can limit the payback on the cards, according to New credit-card deals. And some of the best rewards come with cards that carry an annual fee.

Survey highlights

If you'd like to take advantage of an attractive offer, the good news from our survey is that more people are being approved for credit cards. Only 14 percent of respondents were denied a credit card in 2011, compared with 24 percent in 2010.

But the picture remains complex. Though the respondents to our nationally representative survey generally reported better treatment from card companies, some are still struggling with debt. Here are some highlights:

• Only 12 percent said their credit-card companies had treated them unfairly in general, down from 15 percent in 2010 and 22 percent in 2009.
• Thirty-seven percent indicated that they had experienced unwelcome news about lower credit limits, higher rates, late payment fees, canceled credit cards, etc.—down from 47 percent in 2010.
• More than half received good news regarding increased credit limits, lower rates, or expanded rewards—up from 46 percent in 2010.
• The share of cardholders who have revolving balances on their credit cards has declined from 46 percent in 2009 to 42 percent in 2010 to 39 percent in 2011.
• Median debt levels on credit cards (among those carrying balances) in our survey was $3,414 this year, down from $3,793 in 2010, and $4,928 in 2009.
• Overall, 51 percent were highly satisfied with the service they receive from their credit cards, versus 45 percent a year ago.

Still disgruntled

Despite those positive trends, credit cards remain one of the lowest rated services ever analyzed by the Consumer Reports National Research Center. Credit cards fare just a smidge better than computer tech support, a perennial low scorer.

Satisfaction was highest among people who pay off their credit cards every month and enjoy the perks of credit cards, such as convenience and cash back or points rewards. But another segment of consumers still struggles to manage its cards. Fourteen percent said they would be unprepared to meet financial challenges in the next six months without credit cards, down from 18 percent in 2010 and 21 percent in 2009. And 22 percent of people carrying balances owed $10,000 or more in credit-card debt. Paying off that debt remains an elusive goal for many people—14 percent said they had no idea when they'll be able to pay off their balances.