If you simply tally up the average rates charged by the five hundred largest issuers you will come up with a straight industry average of 16.88%. If you the average the rate charged by each of the top one hundred issuers against the market share of each issuer you will come up with an weighted average of 17.84%.

According to computations by the Federal Reserve the lowest average card rate in the twenty year history of bank cards occurred in 1978 when rates hit 16.89%. In the past twelve months average card rates have dropped 1.3%, from 18.18% to 16.88%. By comparison the prime rate has dropped only 0.5%, from 6.5% to 6.0%.

The price war of 1992 was inevitable. Looking back over the past five years the industry was clearly engaged in a number of competitive skirmishes that led to last year's price collapse.

In 1988 the concept of marketing cards to specific groups of consumers became a reality. Just about every association in the country from the National Wildlife Federation to National Education Association signed agreements with issuers to offer cards to their membership. The boom in affinity cards has since petered out but not until cards like the Elvis Presley card, Breyer's Ice Cream card and the Armenian card showed up.

In 1989 VISA and MasterCard beefed up gold cards to match the perks offered by American Express. The gold card strategy offered issuers the tools to entice cardholders to trade up from a plain vanilla standard card to first class gold card. It also enabled issuers to draw away some of the American Express faithful.

During 1990, new issuers, hungry for growth, went on a buying spree. Troubled savings and loans and banks desperate for cash put their entire cardholder base up for sale. Deep pocketed non-banks, like Household International and Associates National, gobbled up smaller issuers overnight. Big issuers like Citibank and Bank of New York also had an appetite for growth through acquisitions.

1991 was the year issuers sought to distinguish their card from competitors by creating the perception of value. The plain vanilla VISA and MasterCard suddenly came in every imaginable flavor. Bells and whistles like purchase protection, rental card insurance, extended warranty programs, calling card options, price protection appeared were offered by even the most obscure issuers.

By 1992 the only strategy left to attract new cardholders was bargain pricing. Variable rates, tiered rates, rates based on payment record, rates with rebates, suddenly emerged. Today, only "unthinking" (nice word for "stupid") consumers pay interest rates above 17%.

Will 1993 bring yet another war or a long awaited truce ?

Neither !

Last year's price combat and cardholder's recent aversion to debt has left some casualties. Some big issuers did not deploy fast enough (with lower rates) and lost tons of cardholders. Many card issuers have witnessed cardholders lowering charge amounts conservatively and raising account payback amounts.

1993 will bring another round of aggressive price cuts and all sorts of incentives to charge, charge, charge. At least one issuer came out swinging with a new gimmick.

NationsBank announced January 6th a new rebate program tied to a savings and an annuity account. Cardholders receive a 1% rebate for every purchase charged and a bonus rebate, up to 7%, for charging at participating merchants. The rebates are deposited into a non-interest bearing account until the balance reaches $100. At that point the funds are transferred to an annuity.

NationsBank is charging a $25 fee to set up the account and a $35 annual fee. The annual fee is waived for first year and will continue to be waived if the cardholder charges at least $2,000 per year. The interest rate is 16.9%. A lower variable rate of 13.9% is also available however the rebate level drops from 1% to 0.5%.

Since the average cardholder charges slightly more than $2,200 per year it will take nearly five years to accumulate enough to get an annuity rolling. Anyone who believes they can retire on credit card rebates is very much like the consumer who pays more than 17% for a card. They are "unthinking".

Sears' proposed Prime Option card will not appear as a VISA card anytime soon.

Sears has been battling VISA for the right to issue a card through a Utah bank. In October a federal jury ruled that VISA violated anti-trust laws by not allowing its competitor, Sears' Discover, to become a VISA member. However last week, the judge who preside over the trial, refused to grant permission for Sears to proceed. The judge will rule later this month whether to set the jury's verdict aside or to grant VISA a new trial.

The judge did indicate in no uncertain terms that VISA's case was "compelling" and he would have ruled for VISA if he had been on the jury.

Union members not affiliated with AFL-CIO now have access to a whale of a card bargain from Amalgamated Bank of Chicago.

The Union MasterCard is now available through several Teamster's Locals, Sheetmetal Workers International and 154 other union locals or system councils.

The card has no annual fee and a 25 day grace period. Best of all the interest rate floats at just 4.5% above prime and is currently at 10.50%.

For more information call Amalgamated Bank at 1-800-365-6464. If you do not qualify as a union member you can still apply for Amalgamated's prime +6.0% card with no annual and a 25 day grace period.

AFL-CIO members can contact Union Privilege in Washington for details on its 11%, no-fee card. The AFL- CIO card does not offer a grace period though. Call 1-202-336-5460 for details.