
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SATURDAY, August 20, 1994                   TAG: 9408220095
SECTION: BUSINESS                    PAGE: A6   EDITION: METRO 
SOURCE: Knight-Ridder/Tribune
DATELINE:                                 LENGTH: Medium

CREDIT-CARD RATES ON THE RISE

Consumers can thank the Federal Reserve for providing a lesson this week about the first law of credit dynamics: What goes down must come up.

Unfortunately, for some the lesson won't come cheaply.

By boosting interest rates - most recently a half-point increase Tuesday - the Fed has triggered credit-card rate increases that could shock consumers who thought they had filled their wallets with low-rate plastic.

The problem is 70 percent of the nation's bank cards now are variable-rate cards tied to the prime rate. Many consumers have been lulled because the prime rate didn't change for about two years. But since March, the Fed has bumped the prime from 6 percent to 7.75 percent in an effort to quash inflation.

``I think there is going to be a lot of ticked-off consumers who will be opening their statements in the summer who didn't even know they had a variable-rate card and then find it has gone up,'' said Robert B. McKinley, president of RAM Research Corp., which tracks credit card rates and fees. ``They're getting back into that deja vu area when consumers didn't have much choice and rates were high. It may compel consumers to move on and get better deals.''

Credit rates have edged down considerably in recent years. Last July, the average credit card charged 17.25 percent - down from 19.23 percent in July 1990. But because many issuers adjust their rates only quarterly, millions of consumers didn't feel the fingers in their pockets until this summer. Likewise, Tuesday's increase won't hit most consumers until October.

But it will hit, McKinley warns.

For example, the typical consumer who ``revolves'' an unpaid balance of $1,700 from month to month will pay about $10 a year in extra interest for each half-point interest increase. The cost is about $30 if you factor in the rises since March, McKinley says.

But that's just the bill on one account. On average, consumers have three bank cards in their wallets.

The good news is, it shouldn't be difficult for most consumers to find a cheaper card, McKinley said. If you have average credit, you can ``reasonably'' expect to qualify for a card charging 12 percent to 15 percent, he said.

by CNB