Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, August 9, 1993 TAG: 9308060332
SECTION: BUSINESS PAGE: 6 EDITION: METRO
SOURCE: CHRISTINE DUGAS NEWSDAY
DATELINE: LENGTH: Medium
A credit card is as American as apple pie and automobiles. Look in almost any adult's wallet and you'll find eight to 12 credit cards, according to industry experts. And these cards are not sitting idle.
Seventy-one percent of all card holders keep a running balance on their bank cards that they don't pay off, according to Robert McKinley, president of RAM Research Corp., a credit card consulting company. And, he says, the average balance for those card holders is $1,654 - an amount that has been increasing each year.
The experts say it's not a very wise way of life, considering its cost. But if you're paying monthly finance charges, now more than ever is the time to re-evaluate your credit card and get a better deal.
The reason: Some issuers now offer rates as low as 7.9 percent. While such rates are attractive, picking one should depend on how you plan to use it.
Some shopping suggestions from the experts: With rates averaging about 16.3 percent, you would be doing well to find a card in the 12 percent to 15 percent range that charges no annual fee. You might do better. But, many times the cards with the lowest rates are available only to consumers with the best credit history. And even then, these cards often have very small lines of credit.
What's more, cards with lower rates may have high annual fees. And some of the low rates are teaser rates that will go up in several months. McKinley doesn't see any advantage to these cards unless you plan to increase your payments and pay off your debt during the introductory period.
If you are one of the few who pays off your credit card bill every month, you'll probably want to find a no-fee card with a grace period - usually 25 days - so you won't be charged interest between the time you buy and the time you're billed.
You might also consider cards that offer rebates or special services, such as the General Motors or Ford cards, or the airline travel cards. The airline cards give you frequent-flier miles; the auto company cards give you credits toward their brand of car. Other cards offer discounts or rebates on consumer goods.
"If you pay your bill in full each month and charge a lot, these can give you something for nothing," says Gerri Detweiler, executive director of Bankcard Holders of America. "Of course with the rebate cards, you have to want the product or it's worthless."
When comparing credit cards, don't forget to read the disclosure statements. They will tell you about other costs, such as the late-payment fees and cash-advance fees. Also look at the statement to make sure the card uses the average daily balance method of calculating interest charges, which is the most common. If the card uses the "two-cycle method," like the Discover card, it means you may end up paying higher interest charges, especially if you sometimes pay your bill in full and sometimes carry over a balance.
When it comes to shopping for the best deal, remember you're in the driver's seat. If you already have a card, start by calling the bank that issued it. "Tell them you don't like the rates and fees. Threaten to cancel your card," McKinley says. If they want your business, chances are they will waive your annual fee on the spot.
What's more, your bank may have low-rate cards available, McKinley says. Bank of New York has a card with a 16.9 percent interest rate and a Consumers Edge card with a rate of 11.9 percent.
If you can't get satisfaction from your bank, "look for places you already do business with that may offer discounted credit card rates, such as credit unions or labor unions," McKinley says.
Finally, if you sign up for a low-rate bank card, ask how to transfer any balances you may have on higher-rate cards. Many cards have simple no-fee transfer procedures.
by CNB