The Internet makes it quick and easy to compare credit card offers. Dozens of sites now offer this free service. They make money if you click through and apply for a card.
“There’s nothing wrong with companies earning referral fees,” said Ruth Susswein with the advocacy group Consumer Action, “but users need to know what the financial relationship is between the company that makes the recommendation and the company that may get your business.”
Consumer Action recently surveyed 54 credit card comparison websites. Most of them disclose this commission structure somewhere on the site – usually in the privacy policy or “about us” sections – but you may have to hunt around to find it.
“We think this information must be clearly disclosed,” Susswein said. “Sometimes it is and sometimes it isn’t.”
Consumer Action believes a website that buries this information in the fine print may be violating the Federal Trade Commission’s rule on endorsements.
When asked about this, Richard Cleland, assistant director of the FTC’s division of advertising practices emailed this comment to NBCNews.com:
“Consumers have a right to know when Web sites recommending particular credit card offers are being paid for referrals. If these Web sites are receiving referral fees that fact should be clearly and conspicuously disclosed it in a way that consumers will not miss it.”
Consumer Action found that some sites that don’t mention compensation explain that they are not “endorsing” or “recommending” any cards. This could be a way to avoid disclosing this information without violating FTC rules.
Searches at different sites yield similar results
Consumer Action was surprised to find that the results on many sites were for a few cards from the same top five credit card companies.
“It was strange how the same cards cropped up again and again on various sites,” noted Linda Sherry, Consumer Action’s director of national priorities. “Sometimes their rankings varied and the deals differed slightly, but it appears certain cards dominate their fields.”
For example, when comparing “zero percent transfer” offers, the Discover More card showed up more than twice as often as the Capital One Platinum Prestige card and the Chase Slate.
Susswein told me they can’t figure out why that happened, since the Chase Slate appears to offer a better deal.
What’s going on here? I contacted some of the biggest comparison sites to get their response.
Cardhub.com founder Odysseas Papadimitriou told me it has to do with market concentration: the top 10 credit card companies issue about 80 percent of the cards.
“It is not surprising that they dominate the market with some of the best offers,” Papadimitriou wrote.
In an email, Ken Lin, CEO of Credit Karma, said his site does not rank cards based on commission, but he freely admits some sites are “influenced” by the pay-out per referral.
“If the card pays more, it will get more placements,” he wrote.
He also suggested another possible reason the Discover card had so many more recommendations.
“The Chase Slate card has higher credit requirement than the Discover More card even though they are both categorized as ‘Excellent Credit Needed.’ This results in fewer people being approved for the Slate Card.
Shon Dellinger, president of credit.com, explained that their algorithm for recommending cards considers consumer preference as well as card features.
“We do recognize that consumer preference can be influenced through brand or advertising awareness that can sometimes override features when consumers make their choice of cards,” he wrote. “This is one of the reasons we offer our regular ‘Best Credit Cards in America’ piece and regularly rank cards at the top of our list even if we aren't able to offer those cards on our site."
Rating the sites
Consumer Action evaluated the 54 comparison sites to see which ones were most useful to someone shopping for a credit card. The sites were rated on nine key factors, such as intuitive interface, search filters, unbiased education and advice, personalized reviews posted by users, side-by-side comparison of rates and fees for selected cards, and the ability to search without registration.
Three sites met all nine criteria: Card Hub, CompareCards and CreditDonkey. Five sites met eight out of nine criteria: Bankaholic, CardRatings, Credit Karma, Credit.com and FindTheBest. (Click here for more results.)
The bottom line
Comparison websites can be a useful tool to search for a credit card. Just remember, a site might favor one card issuer because of the commission structure. That’s why you’d be smart to check several comparison sites before applying for a card. You should also look at the articles on the site.
“Tucked away in these articles are some of the best offers – sometimes even better than on the comparison section,” Susswein told me.
Something else to consider: many cards are not listed on these comparison sites. You won’t find any offers from Bank of America, one of the top credit card issuers in the U.S. That’s because B of A generally does not pay referral fees to these websites.
And don’t expect to find cards from local banks and credit unions. You’ll have to check on them yourself.
Even with these comparison sites, it still takes a little work to find the best card for you.
Herb Weisbaum is The ConsumerMan. Follow him on Facebook or visit The ConsumerMan website.