CardRatings.com Educates Consumers, Grades Companies

When he left the University of Texas at Dallas in 1992, Curtis Arnold had a bachelor's degree and a master's degree in international business and $45,000 in credit card debt.

Arnold returned home to Little Rock with what he described as the feeling of a noose around his neck.

"I for some reason had the wrong perception that I was going to be making six figures and all this stuff and knock the credit card debt out flat in no time. And that did not happen," Arnold said. "I really was grappling with the reality of that."

Ironically, his heaping pile of debt became a stepping stone to success. A year and a half ago, he sold his credit-card rating company for a price in the eight figures.

"After reality hit me, I started to take two steps back and analyze, and I started learning about credit cards from the school of hard knocks, if you will," Arnold said. "And I think sometimes that's the best teaching we can get. And I've really had a passion for consumer education ever since."

Arnold began to rummage through credit card offers, searching for beneficial and, more importantly, harmful offers to post recommendations on a basic America Online page. This was at a time before Google, which Arnolds claims exists.

"So people saw the e-mail link and they started e-mailing me their stories, saying this is helpful," Arnold said. "It became pretty therapeutic at that point."

And a fateful termination of his job at a bank may have been the push out of the nest that Arnold needed.

"I'm not a risk-taker by nature," he said.

So Arnold decided to give CardRatings.com a full-time shot. The company, founded in 1998, flourished into an operation that attracted firms with an appetite for acquisitions. In August 2008, Arnold sold CardRatings.com to QuinStreet Inc., a media and marketing firm of Foster City, Calif.

QuinStreet recently went public, filing documents with the U.S. Securities & Exchange commission that revealed that it purchased CardRatings.com for a cash payment of $10.4 million.

Arnold stayed on as editor-in-chief at CardRatings.com and has since started another educationally oriented operation, the Bill & Sharon Arnold Family Foundation, which provides college scholarships and sponsorships to arts. The foundation honors his parents, who were public school teachers for more than 40 years. The foundation's initial filing with the Internal Revenue Service showed assets of about $200,000 at the end of 2008.

Although CardRatings.com is now owned by a larger firm, Arnold has kept the operation of five employees at its existing location in downtown North Little Rock.

CardRatings.com generates revenue through online advertisement sales. The model is similar to Google Adwords; however, advertisers pay CardRatings.com for actual sales leads instead of click-throughs.

Arnold said only about 10 to 15 percent of the cards that it lists advertise with his firm, and advertisers are warned that advertising won't improve their ratings.

All About The Ratings
CardRatings.com's main function has been to call out dangerous credit offers and to praise banks that offer good credit terms.

"The premise I had for CardRatings.com initially was rewarding those folks that had friendly credit card terms and conditions by higher ratings," Arnold said.

CardRatings.com recently put its money where its mouth is by releasing "best of" lists. Arnold lists what he considers to be the best credit card offers of 2009 by category. The categories are: best cash-back cards, best airline and travel cards, best low interest rate cards, best low introductory interest rate cards, best reward points cards, best cards for consumers with poor or bad credit, most innovative cards and the most innovative new program.

Arnold noted that several cards issued by Arkansas banks populated the list. Simmons First National Bank of Pine Bluff and Iberiabank FSB of Little Rock (formerly Pulaski Bank & Trust) compose the best low interest rate credit card category. Arnold had kind words for the institutions.

"Simmons Bank - who has been doing business the old fashioned way, who has had high credit standards from day one and they haven't really changed their credit standards coming out of this credit crunch - has come out smelling like a rose," Arnold said. (For more on Simmons, see story on Page 1.)

Arnold said it's been exciting and gratifying to be on part of the sweeping change that the industry will experience when the Credit Card Accountability, Responsibility & Disclosure Act of 2009 takes effect. (See sidebar.)

"We were part of this on the forefront of helping to create some massive changes for this industry that has been so associated and so notorious for the credit card fine print that everyone has grown to hate and that has really given this industry a black eye," he said.

Dealing with the CARD Act (Sidebar)
In the long run, the Credit Card Accountability, Responsibility & Disclosure Act of 2009 is a positive piece of legislation, according to Curtis Arnold, founder of CardRatings.com. However, in the short-term, the industry will devise clever, and perhaps devious, ways to offset revenue losses sustained from the regulation, he said.

Experts have predicted that the CARD Act will cost the credit card industry as much as $50 billion in lost revenue, Arnold said.

Much of that loss will come from the requirement that credit cards curb existing fees.

"They've counteracted by rate-jacking and introducing new fees that we've never seen before in this industry," Arnold said.

"An example would be an inactivity fee. If you're using a reward card and you make one late payment, then they're going to basically hold your reward points hostage and charge you a fee to be able to redeem your points."

And this is only the beginning, Arnold said. "We're going to see a lot of other junk fees," he said. "The industry's going to offset this [lost] revenue."

Arnold related a cautionary tale of a new predatory offer that illustrates the lengths to which some firms will go to make a buck: A 79.9 percent interest rate offered by First Premier Bank of Sioux Falls, S.D.

"Can you imagine someone that's recovering from bankruptcy, that's trying to claw their way out, that has fixed income, maybe they're unemployed, and they can't get credit because their credit is trashed. And suddenly they get an offer in the mail from First Premier Bank saying, 'We'll help you rebuild your credit.' And they have no clue about interest rates and the interest rate on the account is 80 percent. That's scary stuff," Arnold said.

But an educated consumer can dodge such a bullet. And Arnold says that holding on through the bumpy short-term will be worth it because the legislation will effect positive change.

"So we're trying to educate consumers that, hey, this is, long-term, going to be a positive. But we're going to have a lot of hiccups. And you need to be aware of what's going on because this affects your pocketbook. And if you're fed up with the big boys, we think this is a great opportunity to highlight a bank like Simmons or like Iberiabank or the Arkansas Federal Credit Union," Arnold said.

Though the legislation may have inspired some new fees, the industry does show signs of positive change, Arnold said.

"I think we're seeing now that some of the big boys are starting to wake up a little bit. And you can argue the motivation. I mean, it's not like they're doing this strictly out of a kind, compassionate concern for consumers. But I think they're starting to realize that, 'We're going to have to be consumer friendly because we've got a target on our backs. And we're going to have to figure out a way to be profitable and consumer friendly,'" Arnold said. "And I maintain that it can happen."