Issuers Sweat Summer Rate Hikes
From the July 1994 Issue of CardTrak
It took less than ninety days to wipe-out one year's worth of reductions in the average bank credit card interest rate. The average A.P.R. for July 1994 now stands at 17.32%, up slightly from last July's average weighted bank credit card interest rate of 17.25%. And the Feds may force rates up another notch or two shortly.

Rates have declined steadily and significantly over the past four years from 19.23% (July 1990) to 16.67% (April 1994). Due to the rise in the prime rate from 6.00% to 7.25% and the proliferation of variable rate cards (from 35% to 69% of al, accounts) average card rates have risen sharply since April.

 
  WEIGHTED AVERAGE CREDIT CARD RATES  
       July 1988      18.93%
       July 1989      18.94%
       July 1990      19.23%
       July 1991      18.96%
       July 1992      18.22%
       July 1993      17.25%
       July 1994      17.32%
 
Most cardholder statements distributed this summer will reflect the increased rates and this has card issuers sweating. The concern is: consumers will notice the change and take action. The rate increase could set off another major wave of rate shopping in a marketplace loaded with aggressive offers. During the 1980's consumers were so passive (and ignorant) they we're willing to pay card rates of nearly 20% and a $20 annual fee. Today's consumer is far more knowledgeable (thanks to the media) about pricing options and highly motivated (thanks to the latest recession) to lower borrowing costs, especially on credit cards.

Besides sweating the potential backlash, card issuers are not sleeping well either. Competitors, some old, some new, are preparing to launch major attacks to pirate cardholders and outstanding balances. This fall will bring another round of new offerings to the marketplace threatening the cardholder camps of the nation's largest issuers.

In addition to consumer and competitive pressure card issuers are already facing criticism from legislators bent on rate regulation. The recent sharp rise in rates is providing plenty of fodder to consumer groups.

What should you personally do ?

First and foremost is open your credit card statement and find out what interest rate you're being charged. If the rate is more than 15.00% and you have good credit you should promptly pick up the telephone, call customer service, insist on a lower rate and threaten to close the account. Say the magic words: "I have CardTrak and its loaded with dozens of better deals". Bear in mind if you carry a balance of at least $2,000, charge at least $3,000 per year, and have a responsible track record you have a great deal of leverage. Card issuers recognize cardholders like you are hard to find. Knocking a few points off the rate is a lot less expensive than acquiring another cardholder to replace you.

Take advantage of this cardholder's market !

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