Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, November 15, 1993 TAG: 9311130035
SECTION: MONEY PAGE: A-8 EDITION: METRO
SOURCE: MAG POFF STAFF WRITER
DATELINE: LENGTH: Medium
Most banks have tied their interest charges to the prime rate, however, so the charges ultimately will rise as other interest rates go up.
The current prime rate is 6 percent.
That means people who pay interest on their revolving credit can get away this year with rates as low as 12.5 percent on their outstanding balance.
Fixed rates are as low as 14.7 percent at First Virginia Bank.
But interest rates are but one side of the cost of holding a credit card. The others are annual membership fees or minimum balances required in other bank accounts to offset the bank's costs.
First Virginia does not charge an annual fee for its basic card. Other banks, such as First Union National Bank, waive the fee for customers who sign up for customized account packages.
First Union offers 22 types of credit cards, most of them for so-called affinity groups, people with related interests such as affiliation with the University of North Carolina, fans of the Charlotte Hornets, Virginia Commonwealth University and Virginia Military Institute.
Gold cards usually have lower fees and interest rates, but customers must qualify for credit lines of $5,000 or more to obtain them.
Parkes Dibble, portfolio marketing manager for First Union, said an applicant generally must have a good credit history and household income of at least $15,000 to receive a credit card.
Banks look at assets as well, he said, but these must be in liquid cash or investments rather than real estate and the like. And it helps in marginal cases to have an account at the bank where you apply.
Signet Bank offers a secured card aimed at helping people rebuild damaged financial reputations.
The secured card program also can help young people whose lack of credit history prevents them from qualifying for standard charge cards.
Merchants, motel clerks, auto rental agencies and others who see the cards cannot tell they are secured; so in the marketplace, the secured cards function just like a standard card. Only the bank knows that its credit line is backed by a savings account.
Fees, however, are higher than for conventional cards because the bank takes a greater risk.
Signet charges a variable 19.8 percent on outstanding balances, the same fee it levies for cash advances on regular cards. Signet has separate interest rates for purchases, cash advances and money transferred from another bank card.
The annual fee is $20, compared to $18 on Signet's standard card, but it's comparable to the annual charge at many other banks.
There is no application fee.
Signet says applicants are accepted for the secured program if the information checks out and the customer actually opens a savings account.
The history of the card's use is reported to credit bureaus as if it were a standard card. Customers who handle the credit line prudently, therefore, can request new histories to help them qualify for other credit such as auto loans and home mortgages.
Under the secured card plan, a savings account is tied to the credit card. The amount on deposit in savings equals the extent of the credit line.
Under Signet's plan, the minimum deposit to open the savings account is $300. The maximum is $5,000.
The money in the savings account may not be withdrawn until the card balance is paid off. The account, however, earns 5 percent interest compounded monthly, a favorable rate in today's market.
After a year of satisfactory performance, Signet will increase the credit line without a new deposit.
by CNB