The heat of the bank credit card price war is showing no signs of letting up. Bank card issuers appear to be picking one of two strategies to deal with this year's scorcher.
One method to attract new cardholders is to revert back to basics by issuing a plain vanilla VISA and MasterCard. By shedding expensive enhancements like rental car collision damage insurance or purchase protection coverage, issuers can offer a stripped down VISA and MasterCard, competing solely on price. Wachovia Bank, based in Atlanta, says the growth of its Prime Plus VISA and MasterCard with an 8.9% interest rate has been nothing but astounding. In the first five months of this year cardholders transferred nearly $300 million from other cards to Wachovia's program. Last year Wachovia picked up more than $400 million from balance transfers.
Wachovia's success has not gone unnoticed, a number of new plain vanilla offers have surfaced this month offering interest rates in the single digits and in some cases no annual fee.
The other strategy is to jazz-up the offer with a give-back program coupled with average pricing. Programs like the General Motors MasterCard and the General Electric Rewards MasterCard have been highly successful. For example GM has picked up nearly four million accounts and $3 billion in new balances since the product's introduction last September.
As a result, more twists on give-back programs have emerged in recent months. Unlike the plain vanilla strategy, nearly all of these incentive programs carry interest rates between 15% and 17%.
Here's the poop on the latest offers:
1. Louis Rukeyser's Wall Street Club is announcing next month a no annual fee Gold MasterCard with an incredible interest rate of 5.9% for the first six months. Afterwards the rate will rise to prime + 2.9%.
Rukeyser, one of Wall Street's most prominent investment personalities, launched his club in March of last year and has signed up 450,000 members. The Gold MasterCard is a new benefit for the group and will be issued by Union Planter's Bank of Memphis. The new card is for members only and should do quite well since 90% of the group have incomes exceeding $50,000 per year and most have investments.
2. Boatmen's Bank in St. Louis announced two new cards June 15th. Consumers have a choice between a 9.9% card with a $39 annual fee or a no annual fee card with a 15.3% rate. The bank is offering credit lines ranging from $3,000 to $10,000 on the cards.
Consumers with minimum household incomes of $24,000 and residing in Missouri, Kansas, Illinois, Tennessee, Oklahoma, Arkansas, Iowa, New Mexico and Texas are eligible. Call 800-653-2265 for more information.
3. First Deposit National Credit Card Bank in Concord, New Hampshire unleashed a new no annual fee standard and gold card late last month. Consumers throughout the U.S. except Wisconsin can apply for the free cards carrying a 13.9% variable rate (prime +7.9% with 13.9% floor). For more information call 800-572-2274.
4. Bank of Canton in San Francisco is dropping its fixed interest rate to 12.9% effective July 1st. The annual fee remains at $15. The card, one of the best in the West, is available to all California residents. Call 415-362-4100.
5. Wells Fargo introduced the California Advantage VISA and MasterCard that gives consumers a 5% rebate on purchases, which can be applied to points and fees, or even to lower the interest rate on a new Wells Fargo home mortgage. The new program, announced in mid-April, carries a 16.9% variable rate with a $25 annual fee for a standard VISA and MasterCard and a 14.9% variable rate with a $50 annual fee for a Gold VISA or MasterCard. For more information call 800-547-9355.
6. U.S. Bank in Portland and U.S. West teamed up to offer a co-branded VISA card with a calling card feature in April. Cardholders receive a rebate of up to one percent of card purchases, and up to two percent on U.S. West calling card calls. The maximum rebate is $500. For more information call 800-872-2699.
7. From the secured card sector Key Federal Savings Bank in Maryland announced a new policy of graduating cardholders to unsecured cards in as few as 30 months. The graduation comes complete with a return of the savings deposit and a lower interest rate/annual fee. Unsecured cardholders will pay 16.9% and a $25 fee versus the 21.9% and a $35 fee for the secured card.
To qualify cardholders must maintain an excellent payment record, have no downturn in overall credit history, no excessive financial obligations and a minimum annual income of $15,000.
Key Federal is the nation's pioneer issuer of secured cards and offers one of the best programs in the country. For more information call 800-228-2230.
A number of consumers, some referred by the FDIC, have called about a suspicious credit card offer from a company called: First Citizen's Bankcard Systems of Washington, DC.
The offer appears to be an application for a VISA and MasterCard with either a 7.75% interest rate or a no- annual-fee card with an 11.9% interest rate. However the issuing bank is not listed and the firm is charging an up front fee of $35.00 to process the application. The brochure also makes reference to RAM Research, Wall Street Journal and Bank Rate Monitor.
VISA and MasterCard regulations require disclosure of the issuing bank on all applications and prohibit the charging of fees for applications. Consumers, therefore, should be wary of any offer that fails to comply with VISA and MasterCard regulations. Consumers should also avoid supplying confidential data (social security number, birth date, employment information, credit references, etc) to suspicious firms.
Our investigation of First Citizen's Bankcard Systems found the business had no telephone number just a Washington, DC post office box. The United States Postal Service revealed the boxholder resided in a Bethesda, Maryland apartment. Contacting the owner at his home uncovered the business consisted of selling a list of low-rate or no-fee cards. The business owner acknowledged he did not have authorization from VISA, MasterCard, RAM Research or any other firm.
MasterCard's "Smart Credit Quiz" has been an smashing success. Hundreds of thousands of consumers across the country have phoned in for their personal copy since its release in April. To order your free copy call 800-999-5136.
VISA's "Credit Cards: An Owner's Manual" featuring the cartoon character Cathy also continues to draw attention. For a free copy call 800-VISA-511.
