Credit card search services could point more consumers to credit union products when a new banking regulation, the Durbin Amendment, takes effect this summer.
"Nerding … please wait.” That’s the message NerdWallet announces as it searches for the credit cards that offer you the best rewards at the lowest rates. And if NerdWallet’s CEO Tim Chen is correct, credit cards from credit unions will increasingly be among the top results.
A new bank regulation, the Durbin Amendment to the Financial Reform Bill, is expected to put a damper on free checking and debit card rewards for banks as it cuts back a lucrative revenue stream from debit card transaction fees. But the reform could give credit unions a leg up in competing with banks in offering customer kickbacks. More people should see a “compelling reason to make the switch from their bank to a local credit union,” says NerdWallet’s founder, Tim Chen, a former hedge fund analyst, in a press release. That’s because most credit unions will be exempt from the rule, which does not apply to institutions with less than $10 billion in assets. NerdWallet’s recent study found that credit unions already offered significantly lower interest rates and have far fewer “shrouded” charges, which is probably no surprise to credit union industry insiders. Chen expects even higher interest rates and more fees from banks to make up for their lost income from debit transaction fees.
NerdWallet adds new competition to the lineup of free services that match consumers to their best suited credit cards. The site analyzes your spending and payment habits to find the cheapest and most rewarding card for your lifestyle and preferences. It’s a fast and easy diagnosis. You answer a few simple questions like whether or not you pay off your bills monthly and if you use credit cards for business or personal reasons. Simply fill in some spending habits, define your preferred rewards, and answer a couple questions. Voila! You get an instant a list of NerdWallet’s recommended credit cards, sorted by the highest estimated rewards to the lowest.
BillShrink, Mint, and CreditCardTuneUp.com offer similar services, although they vary slightly from NerdWallet’s. For example, BillShrink includes searches for cell phone plans, television services, gas stations and CD rates, whereas NerdWallet focuses exclusively on credit cards. Howard recommended that consumers take advantage of several search sites and compare the results. That makes sense – consumers may see a particular card repeated in their top recommendations.
NerdWallet may not take itself too seriously – it even promises to “do the homework for you” – but consumer advocates certainly do. They’re hailing these free, one-stop search engines as increasingly important tools, especially as the new regulation is scheduled to take effect on July 21. Consumer advocate Clark Howard says he's impressed with NerdWallet’s unique feature that allows users to enter their credit scores, while The College Investor touted the ability to choose your reward, from airline miles to cash back. Another handy feature for bank-to-credit-union converts is its Credit Union Finder. That allows you to just plug in your zip code, credit score, and student/military status to find the credit unions offering the lowest credit card rates in your area on an interactive map.