Chase Manhattan Bank, as of September 1st, will offer a new variable rate of 16.4% on standard cards and 15.4% on gold cards. The interest rate will drop even lower (to 14.4%) for standard cardholders with balances above $2,500. Gold cardholders with balances exceeding $3,500 will benefit from a 13.4% interest rate.
Chase's new pricing is an aggressive move by a big bank. Unlike Citibank's recent decision to lower rates, Chase cardholders will see immediate savings since the new rates will apply to existing balances. Citibank's new 15.9% variable rate only applies to new purchases.
More than 50% of Chase Manhattan's cardholders will qualify for the new rate structure. Less than 40% of Citibank's cardholders qualified. To be eligible for Chase's new rate, a cardholder must have had a Chase card for at least 12 months with no delinquencies or over-limit infractions. Citibank's requirements include an annual charge volume of $1,000.
Since the first of the year, nine of the top ten issuers have cut rates or introduced new lower rate cards. Sears' Discover card is the only holdout.
The trend emerging is: risk-based (or performance-based) variable rate pricing. In plain English this means good rates for good customers.
Even though most of the new lower rates do not apply to all cardholders, it is producing real savings for real people. There is nothing "phantom" or "cosmetic" about these cuts. Consumer pressure will eventually force rates down for everyone except for ca rdholders with poor account records.
New entrants in the rate war: Mellon Bank (PA), U.S. Bank (OR), First Nat'l Marin(CA) to name a few.
Mellon Bank is notifying existing cardholders via a special insert in the August statement that a new 13.9% variable rate is available. The new card carries a $35 annual fee and is based on prime +6.9% with a 13.9% floor. Existing customers selected to receive the offer simply notify the bank and the interest rate will drop for the current billing cycle. New customers may also apply by calling 1-800-358-1949.
Meanwhile U.S. Bank in Portland is restructuring its pricing, effective September 19th. The new formula will lower standard card rates to 15.4% (prime +9.4%) and gold cards to 13.4% (prime +7.4%). Existing cardholders will have the option of choosing between the new variable rate or the former fixed rate. Call 1-503-275-6111 for details.
First National Bank of Marin is cutting its 19.8% rate to 18.8% effective September 1st. The new rate will also apply to secured credit card accounts. However, the rate paid on the collateral saving deposit will be reduced from 5% to 4%. The bank is also waiving the $50-$60 secured card application fee for consumers applying directly to the bank. For more information call 1-714-588-5160.
Speaking of secured cards, Treasure-Land Saving & Loan (Portland ,Oregon) is now offering two brand new secured cards under the "Orchard VISA" name. Both are very competitively priced.
Applicants can choose between a no-annual-fee card and a low variable rate card. The no-annual-fee card carries an 18.9% rate and 30 day grace period. The low rate card carries a 13.95 rate and $45 annual fee. The bank does not charge an application fee and it is available to consumers with past bankruptcies. For more information call 1-800-873-7307.
In our last issue, we outlined recent activities of American Express and Bankcard Holders of America. Briefly we noted that American Express was sponsoring consumer credit forums across the country and distributing (without charge) lists of banks offering low rate credit cards (prepared by Bankcard Holders of America). CardTrak also noted that Bankcard Holders of America is participating in the American Express forums and recently released a report accusing the bank credit card industry of using "secret billing tactics."
Some of our readers believed CardTrak was suggesting the activities by American Express and Bankcard Holders of America were connected.
Both Bankcard Holders of America and American Express notified us that we were in error to suggest or imply that the relationship between BHA and AMEX extends beyond a simple business deal to purchase lists for public distribution.
In a letter dated July 28th Mr. Elwood Holstein, President of Bankcard Holders of America wrote concerning the July CardTrak:
"The article and a previous press release suggest that BHA is somehow "affiliated" with American Express, and that some of BHA's advocacy work is a direct result of that affiliation. No such connection exists and any suggestion to the contrary is abviously a malicious effort to damage the reputation of Bankcard Holders of America."
Mr. Holstein further stated: "There is no relationship whatsoever between those forums and the BHA study." Regarding the forums he says:"Our comments were not scripted by American Express in any way, and no honorariums was offered or requested." Concerning the recent BHA study he said, "American Express was not party to that study, nor did it see the study earlier than reporters and others to whom we mailed it."
Mr. Lawrence Kurlander, Senior Vice President, Worldwide Communications, of American Express wrote us July 21st and stated:
"You also seem to be puzzled by our relationship with Bankcard Holders of America. Simply stated, we are supplying thier "Fair Deal" list of no fee and low rate credit cards via a toll free number."
Mr. Kurlander continued: "Why are we doing this? We believe that when consumers pay less interest, they benefit, the economy benefits and American Express will ultimately benefit."
Our apologies to Bankcard Holders of America and American Express for making any unintentional false characterizations of their relationship.
Also in our last issue we briefly commented on the recent Barkcard Holders of America study: Credit Cards" What You Don't Know Can Cost You. The study identified seven secret billing mehtods used by credit card issuers:
CASH ADVANCE GOUGING
MISLEADING INTEREST RATES
COSTLY BALANCE CALCULATION METHODS
BACKDATED INTEREST CHARGES
PHANTOM GRACE PERIODS
ENDLESS REPAYMENT PERIODS
NUISANCE FEES
In our opinion and based on our research, this report presents a totally distorted picture concerning an industry and its practices. Rather than educating consumers, this report creates confusion about how bank credit cards work. In some instances it is our belief the report is false and misleading.
To be fair and accurately convey the substance and context of the new Bankcard Holders of America report, we have prepared a special report examining each issue in depth. This report will be available through the pages of Bankcard Update and will also be available to the general public as a separate publication.
For more information call 301-695-4660.
