Credit card interest rates are headed North this year for two reasons. First reason: The Feds are on a campaign to slow the economy, using higher interest rates as the brakes. Second reason: Some issuers are raising credit card interest rates following a brutal period of irrational pricing driven by intense competition.

Indeed some issuers are still tossing around some too-good-to-true deals.

This month, Providian has stuffed pre-approved solicitations in mailboxes across the country offering a no-annual-fee, 5.99% fixed APR, VISA Platinum. Providian also offers a publicly available, fixed 7.99% APR, no-annual-fee VISA Platinum through its Aria website. There are some caveats for these super-prime cards though. For example, the 5.99% APR rate only applies to new purchases. Interest rates for balance transfers range from a variable 12.99% to 21.99%, depending on credit worthiness. The cash advance APR is 21.99%. There are a few other traps too. For instance, there is a 3% fee if a balance transferred to the card is subsequently transferred to another lender within the first twelve months. Providian also discloses it may raise the card's APR to 23.3%, "if a cardholder increases total unsecured debt by more than $5,000 without sufficient income". Cardholders who make one late payment in the first six months will have their APR raised to 12.99%.  Cardholders who make two late payments over a 12-month period are also subject to the 23.3% punitive APR. Providian offers a maximum $50,000 credit limit on the VISA Platinum. The biggest catch is: what-you-see-is-not-what-you-may-get (WYSINWYMG). Providian, like other major issuers, insert a clause in all card offers that says if you do not meet the criteria for the Platinum card offer, you may be offered a standard card. Of course the APR for the standard card is a bit higher than 5.99%. Providian offers standard cards with rates as high as 23.99%.

Meanwhile, the nation's second largest issuer, Bank One/First USA, has been quickly moving offered APRs from a fixed 9.99% to a variable 13.74%. Bank One/First USA has also been slowly, but surely, retreating on its marketing campaigns. A few other issuers have bumped rates up or have switched back to variable rates. However, competition remains alive and well as Capital One, MBNA, and other top issuers continue to pound mailboxes with too-good-to-be-true card offers.

Back to the Feds . . . .

For the fourth time in twelve months the Federal Open Market Committee voted to raise interest rates. The FOMC voted last month to raise its target for the federal funds rate by 25 basis points to 5.75%. In a related action, the Board of Governors approved a 25 basis  point increase in the discount rate to 5.25%. The result: The Prime Rate moved to 8.75%.

The rate hike means Americans will see credit card interest rates soar by $1.4 billion over the next year. Of the 78 million U.S. households that have at least one credit card, the average balance is now $7,564 and the average interest rate is 17.99%. The latest rate increase means the average household will shell out an extra $19 in interest charges over the next twelve months.

About 65% of the nation's credit card issuers adjust rates monthly, while the other portion adjust quarterly. This means many cardholders are already seeing February's rate hike in their March statements, while others will see it in their April credit card statements.

The buzz is the Feds are not finished. More interest rate increases are on the way. So watch your credit card statements carefully.

One final bit of advice: Switch to a fixed rate card. While you cannot lock in a credit card interest rate like a fixed rate mortgage, you can slow up the rate increases with a fixed rate card. Card issuers are permitted to change cardholder terms provided they give at least fifteen days notice to their cardholders. To change a fixed rate card, a card issuer needs to go through all the legal hoops. Given the time and expense involved, most issuers will wait for two or three rate increases before taking on the process of changing a fixed rate.

PLASTIC  POLITICS

Credit cards are playing a significant part in the current Presidential race. Senator John McCain has raised more than $2 million in presidential campaign funds via online credit card contributions. Former Democratic Senator Bill Bradley raised about $1.6 million from Web site credit card contributions.  CyberCash is providing the payment processing technology for McCain, Bradley and dozens of other candidates with CyberCash's CashRegister service.  Aristotle, a company that provides candidates with Web fundraising tools, is using CashRegister to power payments for more than 150 candidates in local, state and federal elections. The CashRegister payment processing service provides customers with real time, online authorization and settlement of transactions.  CashRegister allows online merchants and candidates to accept payments at Web sites and securely process these payments through a financial institution and credit card processor. 

BANKRUPTCY  POLITICS

The steam is coming out of the bankruptcy reform. Nevertheless, Congress continues to reconcile differences in the bankruptcy reform legislation recently passed by the House and Senate. According to CardData, the percentage of gross credit chargeoffs associated with bankruptcy has been steadily declining for the past eight months, from a high of 42.3% in June to 38.9% in February. The latest government figures also show the number of bankruptcy filings declined last year to 1.3 million compared to 1.44 million in 1998. Of the 1.3 million bankruptcy petitions filed last year, 1.28 million were consumer bankruptcies. In 1998, consumers filed 1.4 million personal bankruptcy petitions, according to the Administrative Office of the U.S. Courts. The compromised bankruptcy reform bill is expected to be hammered out within the next several months with a vote on the final version expected by year's end.  The White House supports the softer, Senate version of the legislation.

FIGHT  HIGH  GAS

Priceline.com announced this month it is launching a Priceline for Gasoline card whereby consumers will be able to name their own price for up to 50 gallons of gas per month. Starting May 20th, Priceline WebHouse Club, a licensed affiliate of priceline.com, will offer the new service that is expected to save drivers 10 to 20 cents per gallon from most major oil companies. Over 100 national sponsors will contribute to Priceline WebHouse Club customers' gas purchases in return for customers' agreeing to try their products and services. The Priceline for Gasoline card is free to any consumer by accessing priceline.com. All four million previous priceline.com customers and all WebHouse Club members will automatically receive the blue colored gas card free in the mail. To bid, cardholders simply enter the ID number on the back of the priceline gas card and provide a major credit card or debit card account number. Cardholders then choose the grade of gas, the per-gallon price they want to pay, and the number of gallons desired (up to 50 gallons per household per month). If the bid is accepted, then priceline will charge the deal to the credit or debit card and notify the cardholder of the location of the local participating gas station. After each fill-up, Priceline WebHouse Club will automatically e-mail a receipt which also shows the number of prepaid gallons remaining. Priceline.com gas accounts may also be monitored online.

HUGE  DEBIT  CARD  SUIT

Last month, a federal judge certified the retailer's debit card lawsuit against VISA and MasterCard as a class action. The lawsuit, originally filed by Wal-Mart, Sears and eleven other retailers, contends retailers are victims of an illegal tying arrangement, under which merchants are forced to accept VISA Check and MasterMoney debit cards. VISA and MasterCard's off-line debit cards require considerably higher merchant fees than competing online debit cards offered by regional networks. The recent ruling by U.S. District Court Judge John Gleeson means the plaintiffs will represent the interests of more than four million U.S. retailers. The Wal-Mart lawsuit seeks treble damages and various forms of injunctive relief. Actual damages under the lawsuit have been estimated at more than $8 billion which translates into a possible $24 billion to $48 billion exposure for VISA and MasterCard members. Understandably VISA and MasterCard indicated they intend to appeal the class action decision. Contrary to some press reports, the Wal-Mart case and the on-going U.S. Department of Justice antitrust litigation involving duality/bylaws are separate and distinct legal actions. In January of this year, U.S. District Judge John Gleeson, ruled the DOJ could access the Wal-Mart case counsels' analyses of three million discovery documents provided by VISA and MasterCard. 

However, there has been no effort to merge the actions. In February of 1999, the FTC referred its investigation into potentially anti competitive practices in the debit card industry to the DOJ. Reportedly the DOJ debit investigation remains active. CardWeb.com's CEO, Robert McKinley, appeared for eight hours of examination last month by attorneys representing VISA, MasterCard and the Department of Justice. McKinley previously testified in the 1992 VISA-MountainWest (Discover) antitrust trial as an expert witness for VISA. The DOJ duality/bylaws trial is set for June of this year.

MEMBERSHIP  REWARDS

American Express announced its Membership Rewards partner line for 2000 this month. New retail partners include: Bergdorf Goodman, Brooks Brothers, Callaway Golf, Country Road, Oreck, Richard Petty Driving Experience, THE RIGHT START and Swiss Army Brands. The new Membership Rewards travel partners include: Alitalia Airlines, Air Aruba, Disney Cruise Line, Frontier Airlines, Midway Airlines, Omni Hotels, Pro Air, Qantas, South African Airways and Sun Country Airlines. The Membership Rewards Program from American Express was first launched in June 1991 under the name Membership Miles. In 1995, retail and other non-travel rewards were added to the program, and it was re-named the Membership Rewards Program. In October, 1999, American Express expanded the program by offering two new program levels, Membership Rewards Plus designed for frequent travelers and cardholders who accumulate a large number of points and want more rewards flexibility and choice and Membership Rewards Options for cardholders who prefer easy to attain awards. 'Membership Rewards Options' has a separate list or partners.

MOVIEFONE  EXPANSION

AOL MovieFone and American Express entered Houston in February with the launch of a moviegoer frequency program backed by both film distributors and theater chains. First launched in New York City last March, moviegoers in the Houston area will earn a complimentary ticket for every ten purchased through MovieFone with an AmEx Card. The MovieFone program was launched in January in Washington, DC. The Houston program will be available at all Loews Cineplex Entertainment and Angelika theaters which already offer advance tickets through AOL MovieFone and comprise over 70 screens in the Houston area. Participating studios include Columbia Pictures, TriStar Pictures, Universal Pictures, Disney, 20th Century Fox, Warner Brothers, Dreamworks, MGM/UA, New Line Cinema, Miramax, and Paramount Pictures.

AOL MovieFone also announced this month, plans to launch a new program that enables consumers who purchase tickets over MovieFone.com to print their own bar-coded movie tickets at home. Under this new program, moviegoers who purchase their tickets on MovieFone.com will have the option of printing out a bar-coded ticket on their home computer printer. These electronic tickets will eliminate the need for moviegoers to bring a credit card to the theater to retrieve their tickets from automated ticket machines in the theater lobby. Now, they can simply present their home-printed ticket, which will be scanned by theater personnel for quick admission. Consumers who do not have printers or prefer the former method will still be able to pick up tickets at automated machines in theater lobbies, just as in the past. The new home-printing option will also be made available to users of MovieFone's popular 777-FILM telephone service simultaneously.