New studies provide evidence that credit card comparison Web sites may not be completely legitimate. The sites allow consumers to describe their financial situation and credit needs, then—supposedly—a personalized list of cards that best suit the customer’s needs is provided—usually accompanied by links to special offers and applications. But a new study by Consumer Action determined that most card comparison sites generate revenue through referral fees—the site earns a commission from each user who applies or is approved for a card. The nature of the business creates a natural bias so that certain high-paying cards will refer more often than others.
In its study, Consumer Action examined 54 credit card comparison sites to analyze the usefulness and accuracy for credit card customers. The firm also examined nine key elements on each site, including: Intuitive user interface and search filters; results from a variety of users; ability to search anonymously; unbiased educational information; side-by-side comparisons; search filters; personalized reviews; current card information; and debt repayment calculators. Only three—Card Hub, CompareCards.com and CreditDonkey—of 54 Web sites met all nine criteria. Another 13 met most criteria; however they did not compare all available credit cards. In fact, the study found most comparison sites recommended the same credit cards from the same five issuers.
“It was strange how the same cards cropped up again and again on various sites,” noted Consumer Action director of national priorities Linda Sherry. “Sometimes their rankings varied and the deals differed slightly, but it appears certain cards dominate their fields.”
Although consumers will see the majority of card referrals sites recommend offers from Discover, Chase, Capital One and American Express over and again, Bank of America will be left out of the mix. As a policy, the bank does not pay referral site fees, and therefore its cards are not included in card comparison recommendations, even if Bank of America is the third-largest issuer in the United States and a Bank of America card happens to be the perfect match for selected criteria.
According to the Federal Trade Commission, Web sites that are paid a fee for referring a product are required to disclose as such. And although most card comparison Web sites post a similar disclosure somewhere—whether it be in a privacy policy, about us section or terms of use—the average Web user will have no knowledge of the business relationship between the bank and the site owner.
“If they’re making a (credit card) recommendation and getting a commission they should make clear and conspicuous disclosures that they receive compensation,” the FTC’s Division of Advertising Practices Richard Cleland told Consumer Action. “And hiding at the bottom of a (Web) page is not enough.”
