Banks alter policy as people pare down on credit cards

Credit cards, it seems, are just like any other product: When they get more expensive, fewer people buy them. Or they buy fewer of them. That is what many US banks have been finding as they add up more than a year of higher interest rates and charges on major bank credit cards like Visa and MasterCard. While the higher costs seem to have slowed the growth in plastic a bit, they may also have contributed to the recent slowdown in retail sales.

''There has been a 'consolidation' of credit card accounts,'' said Lee Knicely, vice-president in charge of the bank card division at AmeriTrust Bank in Cleveland. He said many customers who were carrying cards from both Visa and MasterCard or were carrying several types of cards have consolidated their accounts into one or two cards since the new charges were put into effect, he said.

At AmeriTrust, the most noticeable of these new charges was a $15 annual fee. Until the credit crunch in the spring of 1980, fees such as this were limited to ''travel and entertainment'' cards like American Express and Diners Club. Now they are used by most banks.

But not all banks. Customers of Crocker National Bank in San Francisco are not charged an annual fee, but are assessed a 12-cent ''transaction charge'' every time they use their card. A card would have to be used 125 times a year to exceed a $15 annual fee, even more often to exceed the $20 fee many other banks are charging.

''We're very pleased with it,'' Crocker spokeswoman Margaret Bradford said of the 12-cent policy. The policy meant Crocker lost fewer customers than banks using flat annual fees, she said.

The other piece in the banks' strategy to make their card services earn money again was higher interest charges on unpaid balances. At New York's Citibank the annual percentage rate was raised to 19.8 percent on all purchases and cash advances. This increase was made possible, said Dee M. Calliger, vice-president for Citibank's card division, when the New York Legislature lifted the state's usury ceiling prohibiting banks from charging more than 18 percent on balances under $500 and 12 percent on balances above that.

Citibank also began charging a $15 annual fee, Mr. Calliger said.

At AmeriTrust, the across-the-board rate is now 18 percent instead of 18 percent for balances under $600 and 12 above that, Mr. Knicely said. The bank also adopted a $5 ''late fee'' for customers who do not pay their minimum balances on time.

At the Mellon Bank in Pittsburgh, they would like to raise their interest rates but can't, the bank's vice-president, Sandra McLaughlin, said. Bankers in Pennsylvania have not been as effective in lobbying their legislature as their colleagues in New York. Interest rates are only permitted to rise 1 percent above the bank discount rate, the rate banks are charged for loans from the Federal Reserve System. As a result, bank card rates now stand at 15 percent and no annual fee is permitted.

This is why Mellon is looking for another state where it can base its bank card operations, Ms. McLaughlin said. The most likely place is Delaware, where legislation lifting usury ceilings and making it easier for out-of-state banks to move in was passed last year. Before the Delaware action, Citibank made a similar move, moving its card division to South Dakota. But most banks have not had to move their card offices, and have been able to send out notices announcing higher rates and fees.

In many cases, recipients of these notices have responded by sending some of their cards back. A recent survey by MasterCard International found a 6 percent drop in the number of people holding its card from the end of June last year to the end of June this year, MasterCard spokesman Alex McCallum said. A year ago there were 57.1 people carrying MasterCards, compared with 53.7 million at the end of this year.

''We found the most attrition among dual cardholders (people carrying cards from both Visa and MasterCard),'' Mr. McCallum said.

There was a 7 percent drop in the number of people carrying more than one card, compared with a 4 percent drop for those who had just one card to begin with, he said.

The diversity of charges and fees means many people are now doing comparison shopping for the best value in credit cards the way they would look for the best value on a pound of hamburger. Some bankers report customers sticking with their Visa card, for instance, but switching the bank that provides it, perhaps finding one that has a lower annual fee or no fee at all, a transaction charge like Crocker, or lower interest rates.

One result of this attrition and switching, AmeriTrust's Mr. Knicely says, is that the banks are ending up with a better class of card customer. ''People are being more wise in the way they use their cards,'' he said. ''The fee increases your awareness of what you are doing when you charge something.''

They are also not using their cards as often, something retailers have noticed. ''Retail sales have been pretty flat for a year,'' noted Visa spokesman Richard Rossi. ''I'm sure (higher interest rates and fees) contributed to that.''