Plummeting interest rates in the cards for consumers


American consumers have the opportunity to benefit from the lowest credit card rates in more than 20 years.

The average bank card rate has fallen 2 percent in the past year to around 16 percent, but you may be able to cut that rate in half by shopping around.

This column has railed for years about how high credit card rates remain no matter what occurs with savings rates. But now recession, consumer awareness and industrywide competition are making their presence felt.

"Since we've offered low-rate credit cards, we've seen explosive growth, our cardholders doubling to 60,000 in a year and a half," said Richard Rieser, president of Oak Brook Bank, Oak Brook, Ill. [800] 666-1011), which offers an 8.9 percent variable rate MasterCard with a $39 annual fee.

"A bank our size can do that, but the largest card issuers can't, since offering low-rate cards would cannibalize their existing high-rate business."

Low-rate cards aren't for everyone, since you must meet credit criteria.

"If you're looking for a low-rate card, don't apply to lots of them all at once, for this triggers a red flag to card processors that you're going after too much credit," warned Jeff Sandefur, vice president with AFBA Industrial Bank in Colorado Springs, Colo., ([800] 776-2265), which offers an 8.9 percent variable rate MasterCard and Visa with no fee.

"If you already have a large number of cards with high limits, you might have to reduce that number before we could offer you one of our cards."

It makes good sense to improve upon the rate you're now paying.

"If you're paying more than 14 percent interest, you're probably paying too much," advised Gerri Detweiler, executive director of the nonprofit Bankcard Holders of America, which for $5 offers the booklet "Exactly How to Get a Low-Interest-Rate Credit Card" from BHA headquarters, 560 Herndon Parkway, Suite 120, Herndon, Va. 22070.

"Furthermore, if you have a low-rate card but still have high balances on your high-rate cards, use your low-rate balance to consolidate that debt."

In some cases, especially if your credit record is good, you can successfully ask your current credit card company for a better rate -- if it means retaining your business.

These days, portfolios of big card issuers such as Citibank, Chemical Bank and Chase Manhattan Bank aren't growing, but those competing on rates are making significant cardholder gains, noted Robert McKinley, president of RAM Research Corp., which tracks the credit-card industry.

"Interestingly, the GE credit card came out last September with an 18.4 percent rate and a $25 annual fee, but within six months the fee was dropped and the rate lowered to 16.9 percent, or 15.9 percent for those who are better risks," said McKinley. (A $5 copy of RAM's most recent monthly report on rates and trends is available from RAM, P.O. Box 1700, Frederick, Md. 21702.)

A host of new "special benefits" cards offered by various corporations permit rebates on services, products or fees. But, unless you'll really use the rebates from the likes of Ford, GE, GM or H&R; Block, you're better off with a low-rate card.

Choosing between a low-rate card or card with no fee depends on your usage. If you pay your balance every month, the rate doesn't matter and you should look for a card with no annual fee and a grace period for payment, explained James Daly, editor of Credit Card News in Chicago.

"However, if you revolve your balances from month to month, shop for the lowest rate you can find and worry less about the annual fee," Daly concluded.

Lowest-rate cards available nationally, according to Bankcard Holders of America, recently were:

* Signet Bank, "Consumer's Best," Richmond, Va.; MasterCard and Visa; (800) 862-1616; $29 annual fee; variable rate of 6.9 percent.

* Charles J. Givens Organization, Little Rock, Ark.; MasterCard and Visa; (800) 284-4082; $37.50 annual fee; variable rate of 7.75 percent.

* Federal Savings Bank, Little Rock, Ark.; MasterCard and Visa; (800) 374-5600; $33 annual fee; variable rate of 7.92 percent.

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