Demand for Low-Interest Credit Cards Bears Fruit - with Strings Attached

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NEW YORK - Complaints by consumers and politicians over credit card interest rates that are far above the rates on mortgages and other loans seem to have borne fruit, with spreading offers of cut-rate cards.

But low-interest plastic generally has strings attached.

While many lenders are lowering interest on bank cards such as Visa and MasterCard, the changes often also may bring higher fees, shortening of the ""grace period'' before interest charges take effect or tightening of credit requirements.

""By eliminating the grace period we're able to lower the rate,'' said Marc Chodorow, a spokesman for Goldome, which this past week began offering a Visa card with a 13.9 percent annual interest rate, compared with the 18 percent on its regular Visa.

Others have cut interest rates, but only for balances over a certain amount, say $1,500.

The interest rate on bank cards averaged 18.91 percent in the May 14 survey of 50 large banks and thrifts in five major markets by the Bank Rate Monitor newsletter.

By comparison, rates now hover in the 10 percent range for fixed-rate home mortgages, 11.7 percent for 48-month auto loans and 15.6 percent for a 24-month unsecured personal loan, the newsletter said. Those rates generally are several percentage points lower than they were six months ago, having followed a drop in open market interest rates since then.

A recent survey by the Bank Credit Card Observer newsletter indicated that among 85 banks nationwide the annual percentage rate on Visa and MasterCard ranged from a low of 10.5 percent to a high of21 percent.

Many card issuers have taken advantage of the disparity and of publicity over by congressional proposals to limit credit card rates, says John Crothers Pollock III, publisher of the monthly newsletter. Pollock contended that although recent surveys by the publication indicated most consumers knew little about wide variances in card rates, responses to cut-rate card offers showed low rates wereimportant to them.

""Customers are not apathetic,'' he said. ""They are indeed interest rate sensitive. Our survey indicated that 40 percent would use cards more often if rates were lowered to the 12 percent found inArkansas.''

Competitive pressures also may play a role.

""Its an effort across the board for banks to show their customers they care,'' said Pollock. ""It's not an effort to seek out-of-state customers, but to keep their own customers.''

John McCleary, president of Home Plan Savings in Des Moines, Iowa, said his thrift's offer of a 12.9 percent annual rate on one type of Visa and MasterCard was not strictly promotional, but Home Plan believed it could use the fall in rates to widen its card base.

""Our cost of money has dropped, we should be passing that on to the consumer,'' said McCleary. ""We're a small association, but we're competitive.''

At the same time, Home Plan's low-rate card is available only for customers with proven credit ratings and minimum annual incomes of $15,000 for individuals and $24,000 for joint accounts. …

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