How consumers can win in credit card battle

Your mail carrier has become the weapons handler in a battle for market share. The combatants are the major issuers of credit cards, primarily Visa and MasterCard, but also Discover, American Express, and Diners Club. Since almost everyone who wants or needs a credit card - and many who don't want or need a card - has at least one in his wallet, the big credit card issuers are now fighting over each other's customers.

To wage this battle, the banks are offering a variety of usually needless gimmicks, including travel insurance for your luggage, extra medical insurance for trips, discounts on purchases that are overpriced to begin with, and cash back for people who use their cards a lot.

But almost none of these big banks are offering a really low rate on a credit card. For people who often maintain a monthly card balance, the savings from a lower interest rate would probably pay for most of those extras, if you needed them.

``Only a handful of banks are using price as a basis for competition,'' says Elgie Holstein, associate director of the Bankcard Holders of America, a consumer group.

Even after several years of fairly low interest rates on most other consumer loans, the national average rate on bank credit cards is still 18.3 percent, Mr. Holstein says. But for the top 25 banks, which issue more than half the cards in the United States, the average rate is closer to 19 percent, he adds.

``The banks aren't going to lower their rates,'' says Spencer Nilson, publisher of the Nilson Report, a Los Angeles newsletter on the credit card industry. ``They don't need to.''

For one thing, he says, there seems to be no clamor among these banks' customers for lower rates; for another, the banks with the highest rates still have the most cards. About 32 percent of all bank card business is done by the top 10 banks, Mr. Nilson says. These include Citibank, Bank of America, Manufacturers Hanover, and Chase Manhattan.

Citibank, for example, has more than 19 million of its Visas and MasterCards being carried around, and those cards represent some $15 billion of outstanding debt for this bank alone, Nilson says.

He believes the current round of gimmicks, prizes, discounts, even ``affinity'' cards, which carry the emblem of a sponsor that splits the profits from the card with the bank, is a short-lived phenomenon.

Consumer groups hope he's right. ``It's a sorry state of affairs when you have to encourage consumers to increase their spending in order to get a very minimal benefit,'' like a discount on purchases, says Michelle Meier of Consumers Union. ``Most people could probably buy these things for less at a discount store.''

Meanwhile, more credit cards are coming from other sources. Many credit unions offer Visas and MasterCards at rates that are usually a few percentage points less than the major banks, and the American Association of Retired Persons now has its own credit union. One of this credit union's first new products is a Visa card with a $10 annual membership fee (the standard is closer to $20) and a 14.9 percent interest rate.

A third major source for credit cards is the small banks and thrifts scattered around the country which are trying to make a little extra money on a card operation, or are located in a state with legislatively set interest-rate ceilings. Those states, Holstein says, are Arkansas, Connecticut, Texas, and Washington.

For consumers who are thinking of switching credit cards or picking up a new one, the choice seems to be between one of the major banks offering higher rates, with the possibility of some gimmicks; a credit union; or a small to mid-size bank that either chooses to offer lower rates or must offer them.

If you don't keep a balance on your account from month to month, the higher rate won't matter. In this case, look for a lower annual fee and any extra services that are really useful and priced fairly. Some travel or supplemental hospitalization insurance may fit this category, but compare rates on this coverage elsewhere.

Also, some of the large banks have good records of service in case of problems or emergencies. ``Citibank has about the best service of anyone,'' Nilson says. For example, the bank is good about quickly replacing lost or stolen cards, he says.

If you do carry an outstanding balance, a lower rate could mean big savings. Cards with low interest rates are available, but it may take a little bit of digging to find the 12, 13, or 14 percent you want. Calling some of the banks in your area or watching the newspaper ads - even the mail - may help.

If you want to apply for a card from out of state, write to the Bankcard Holders of America, Suite 1000, 460 Spring Park Place, Herndon, VA 22070. For $1.50 each, you can get a list of banks offering credit cards with no fees, or a list of banks with the lowest interest rates.