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It's no secret that where you live can have a huge impact on how much you pay in rent or taxes. Less widely known is the fact that your home state may also determine the features and conditions of your credit cards, or even whether certain cards are available to you at all.
Here’s a rundown of the possible variations, based on marketplace offerings and a notable settlement.
Differing payment options
A recent settlement between American Express and the Consumer Financial Protection Bureau (CFPB) has raised the profile of variations in card conditions by locality. It arises from how Amex customers in certain U.S. territories were the victims of “discriminatory practices.” The CFPB says these included “charging higher interest rates, imposing stricter credit cutoffs, and providing less debt forgiveness” to consumers in Puerto Rico and the U.S. Virgin Islands (collectively described as “Puerto Rico” in the CFPB documents).
A few examples of the disparities show how egregious they could be. For example, in settlements with cardholders who were in arrears, the average Puerto Rican cardholder had to pay back 73% of the amount owed, the CFPB reports. In contrast, cardholders in U.S. states paid an average of 55%, and some settled for as little as 42% by accepting settlement offers that were never mailed to cardholders in Puerto Rico.
Amex also set stricter credit score requirements for the cards it offered in Puerto Rico. As a result, the company denied credit to certain Puerto Rico card applicants who would have been approved for comparable U.S. cards had they lived in the 50 U.S. states, according to the CFPB.
More than 200,000 cardholders were affected. Amex has paid more than $95 million in redress to those customers, and is required by the CFPB to pay a further $1 million. The company has also agreed to cease the practices. No financial penalties were assessed, the CFPB says, because Amex self-reported the problems, voluntarily began redress with the affected customers and cooperated with the agency investigation.
Differing card availability
Nothing, however, prevents Amex or other card issuers from withholding certain cards from the market in particular states and territories. As careful readers of credit-card agreements know, Puerto Rico and other U.S. Territories are most often affected, but certain cards may not be offered in some continental states, too.
The most striking example is the Barclaycard Arrival® Plus World Elite Mastercard®, named one of the best airline and travel credit cards by ValuePenguin and other outlets. Despite the card’s popularity, Barclays does not offer this card to Iowa residents. Why the exclusion? Some have guessed that this is due to Iowa's Consumer Credit Code, which caps delinquent payment fees at $15 — far lower than the Arrival Plus' $37.
A Barclays spokesperson confirmed this with us, saying the company did not offer the Barclaycard Arrival® Plus World Elite Mastercard® in Iowa due to the state's credit card laws. However, this is a dubious claim since Barclays' other credit cards simply lower the delinquent fee for Iowa residents to the state-regulated $15. In other areas where we’ve observed conflicts between Iowa's code and Barclays' terms, the bank's contract typically made an exception for Iowa residents to remain compliant with state law. The Arrival Plus was the only exception to this and it remains the only Barclays unavailable to Iowans.
Even when a card is universally offered, terms can vary by state. Certain credit cards from Citibank offer insurance in the event a checked or carry-on baggage is lost, stolen or damaged. The benefit covers you for up to $3,000 per traveler. That is, unless you happen to be a New York resident, in which case your coverage is limited to just $2,000.
Indeed, New Yorkers tend to face worse terms on insurance-related benefits from all issuers. On Citicards that offer damage and theft protection, cardholders enjoy primary insurance coverage — meaning it kicks in before they need to file a claim with their home or renters’ insurance. For New Yorkers, the coverage is secondary.
These types of small differences are present throughout the credit card industry. Many likely go unnoticed, since they mostly apply to ancillary benefits such as insurance. Diligent readers will find these state-by-state exclusions and caveats deep within the fine print of their credit card agreements. Most are rooted in legal or regulatory differences between jurisdictions, and not in the kind of discriminatory marketing practices highlighted in the American Express settlement.