Credit Card Industry Shakeup Offers Savings to Consumers

By Wells, Rob | THE JOURNAL RECORD, July 6, 1993 | Go to article overview

Credit Card Industry Shakeup Offers Savings to Consumers


Wells, Rob, THE JOURNAL RECORD


Associated Press

NEW YORK _ A competitive shakeup in the credit card business offers consumers a chance to save a bundle, if you know where to look, what you need and how to ask the right questions.

Falling interest rates and a pack of aggressive new issuers have rattled the old guard, which only a few years ago loaned credit at levels around 20 percent. Even Citibank, the nation's biggest issuer, is cutting interest rates and spicing up the deals on its cards.

Finding which card is best for you requires some digging. About 5,700 banks issued cards with the Visa and MasterCard monikers in 1990. Many of them have different features.

Beyond the purveyors of Visas and Mastercards, other credit card issuers are brawling to get their plastic into your wallet.

American Express Co., for example, offers the Optima Card. Unlike the American Express family of green, gold and platinum charge cards, which require you to pay your bill in full each month, you can keep a credit balance with the Optima card.

The Discover Card, created by Sears, Roebuck Co., is another relative newcomer. That card has gained increased acceptance among consumers since its debut in 1986, partly through pioneering the allure of a rebate incentive that gives customers cash rewards, depending on how much they buy with the card.

Robert McKinley, president of Ram Research Inc., a Frederick, Md., concern that follows the credit card industry, says consumers essentially have two options. One type of card adds "some tangible benefit" such as a rebate or discount for a purchase, while the other type is a "stripped-down, plain vanilla card" that competes solely on interest-rate cost.

Making an honest appraisal of your spending habits is the first step in picking the correct card. Do you really pay the bill off each month? Many consumers try, but about 70 percent keep a balance from month to month.

Here are four descriptions of the typical card holder and what each should seek when hunting for plastic bargains: Low spenders who don't pay their cards off in full.

If you charge the average $2,200 a year and carry a monthly balance of $1,100, look for a card with a low interest rate _ even if it doesn't have a grace period, says Michael Auriemma, managing director of Auriemma Consulting Group, an industry consultant in Westbury, N.Y.

A grace period is the delay, usually 25 days, from the time of purchase and when the parking meter for interest starts ticking. Bank of New York Corp. …

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