Is this signaling a crack in credit card interest rates? Absolutely ! Do not be surprised if other major issuers, charging 19.80%, slash rates before the end of summer.
Last month, First Wachovia Bank also known as First Atlanta announced a super low rate and a new name. The issuer, now known as Wachovia Bank, introduced a variable rate card just 2.9% over the Prime Rate. Currently the rate is at 11.40% and is available in both a standard and gold VISA or MASTERCARD. But the annual fee is steep. Standard cardholders are charged $39.00 annually and gold cardholders pay $49.00 per year.
If you carry an average daily balance of $1600, the total annual costs would be approximately $221. This is a considerable savings over the $336 in annual costs you would pay on a card with an 19.80% A.P.R. and a $20.00 annual fee. However, if you carry an average daily balance under $1,000 or pay-off the balance each month this card is no bargain.
Another top 25 issuer, Chemical Bank, last month switched to a variable rate, lowering rates on all its card products. Cardholders formerly paying 19.50% now pay 18.40%. Cardholders with a relationship through the Chem Plus or Select program pay just 16.00%.
Other major issuers have jumped on the bandwagon. First USA of Delaware, recently launched a solicitation for a no-annual-fee VISA GOLD with a 25 day grace period and a 16.90% A.P.R.. National Westminister of New York lowered the VISA GOLD A.P.R. from 16.80% to 15.00% this month. Commerce Bank of Omaha announced last week it is dropping the 22.00% A.P.R. on its standard cards to 19.80%, effective July 1st.
In the wake of lower general interest rates, many issuers are reviewing pricing policies or experimenting with lower rates/fees. But there is more to it !
Helping to fuel the fires of competition are the likes of American Express, Sears, Ford Motor Company and General Motors.
American Express rolled out full page advertisements over the past few several weeks calling attention to the low, 16.25% A.P.R. charged OPTIMA cardholders. The ads contrast the high 19.00%+ rates charged by the other top 10 U.S. issuers. By raising the public consciousness of high credit card interest rates, Arnerican Express is setting the stage to mass market the OPTIMA card to non-AMEX cardholders by year's end.
Sears, Roebuck and Company has already printed up more than 12.5 million solicitations for a no- annual-fee VISA card called Prime Option. The card will offer consumers a choice between a variable rate, based on the Prime Rate, or a fixed rate. But the program is stalled in the courts as VISA USA seeks to prevent the company from issuing VISA cards from Sears' new subsidiary, MountainWest Financial, in Utah.
Ford Motor Company, already big in the business, announced this month a no-annual-fee VISA and MASTERCARD offering purchase rebates. The card offers a promotional interest rate of 15.90% which jumps to 19.80% in January. The rebates range from 0.5% to 1.59; and a full package of enhancements is included. The card will be issued through the Ford subsidiary, Associates National Bank in Delaware.
And General Motors has apparently struck a deal with Banc One of Ohio to issue an affinity VISA and MASTERCARD. Details on pricing have not been revealed.
For consumers all of this spells g-o-o-d news.
Now is the ideal time to shop for the best credit card.
Remember to look at the credit card programs offered by local banks first. You may be surprised to discover some real bargains if you have or begin a relationship through a checking or savings account.
Also do not be timid to ask your current issuer about lowering the A.P.R. or waiving/reducing the annual fee. If you use your VISA and MASTERCARD heavily you may qualify for rate or fee reductions.
High rollers, carrying balances above $4,000 or charging more than $6,000 annually should look at gold cards. A.P.R.s are lower and some do not carry annual fees.
OTHER NEWS:
In this issue we introduce a new secured card issuer and delete one.
American Pacific Bank of Oregon is now accepting applications, nationally, for a well-priced secured VISA card (800-879-8745). There are no application fees and no surprise fees usually associated with secured cards. The interest rate is 18.9%, the annual fee is $30 and there is a 30 day grace period. The minimum deposit is just $400 and it earns 5.25% in an insured CD.
Meanwhile, another secured card issuer in Oregon, First Consumers Bank, owned by Spiegel Corporation, announced it is raising rates and fees. The new interest rate is 20.5% (up from 18.9%) and the annual fee jumps from $20 to $30. The changes will take effect with the August billing cycle.
We also have deleted Farrington Bank of Delaware from our secured card survey. In May, consumers received solicitations from U.S. Liberty, an agent for Farrington Bank, advising them they failed to send in the processing fee of $35 for a VISA card. The letters listed a seven digit application number. The solicitation was received by consumers who never applied for nor heard of the VISA program run by Farrington Bank or U.S. Liberty. The message is carefully worded but, in our opinion, is very misleading. Incidentally the letter was mailed in an envelope marked "Overnight Letter".
Here is how the Farrington Bank letter was worded: Dear Vroa, Recently you applied for a Bant Issued VISA Credit Card. Your request has been accepted, however, you neglected to enclose your processing fee. In order to continue processing your request for your VISA card application, which is currently on Hold, you must send in $35.00, or if you wish, you may consider a joint account for a fee of $45. If you would like to speed through the processing, enclose an additional $5.00 for a special RUSHHANDLING fee. You must respond within 10 days for this offer to remain in effect.
Remember, you have already been granted GUARANTEED APPROVAL for up to $5,000.00 or DOUBLE your money back!! This secured Visa Card is issued through Farrington Bank, Flanders New Jersey.
Sincerely, PROCESSING CENTER U. S. LIBERTY".
One final note:
The American Express OPTIMA card is available to non-AMEX-cardholders. In other words you do not have to be current holder of an American Express green or gold card to apply for OPTIMA. However you will have to pay a slightly higher A.P.R. and a bigger annual fee.
It is called the de-linked OPTIMA. The A.P.R. is 16.75% (0.5% more than the linked version) and the annual fee is $25 as opposed to the $15 fee for the linked OPTIMA. There is also a difference in the number of enhancements available.
To qualify for a linked OPTIMA you must be a green cardholder ($55yr) or a gold cardholder ($75).
