As rates on credit cards ease up, it's worth it to comparison-shop

Starting this month, the Wachovia Bank & Trust Company of Winston-Salem, N.C., is raising the interest rate on its credit cards from 13.5 to 18 percent. The annual fee is dropping from $18 to $15, but the higher interest rate, which Wachovia says is needed because the response to the three-year-old lower rate wasn't enough to justify its cost, clearly bucks a trend.

What started a few months ago as a small dribble of reasonable rates on Visas and MasterCards is turning into a steady stream of lower rates, lower fees, and -- lo and behold -- more disclosure of credit card conditions, rates, and fees.

Banks in Connecticut, Arkansas, Texas, Washington, and Ohio offer rates from 11.5 percent to just under 16 percent. In Hartford, Conn., a new 15 percent state usury law helped spark a small rate war between Connecticut National Bank (11.75 percent), Connecticut Bank & Trust (12 percent), and Society for Savings (10.9 percent). Some of the rates may go back up in a few months.

Recently, Security Pacific National Bank of Los Angeles, the nation's seventh-largest bank company, cut its rate from 20.5 to 16 percent for its best customers. The national average is still about 18.5 percent. Other banks are lowering annual fees or extending the ``grace'' periods during which no interest is charged.

It's getting to the point where consumers can start shopping for the best credit card deal, whether they keep an outstanding balance on their bill or just use the card for convenience and pay off the full balance every month. If they can't already, people may soon be able to find a good deal close to home instead of having to apply to a bank halfway across the country.

For banks holding out in the high rate stratosphere, there may be a new reason to consider climbing down a bit. The announcement by the AFL-CIO earlier this month that it will offer its members the ``Union Privilege MasterCard'' could present banks with their first large-scale, nationwide competition.

``I think it's the most exciting development in a long time,'' said John Crothers Pollock III, editor of Bank Credit Card Observer, a newsletter published in Iselin, N.J. ``And it's not just the competition. It's a question of making more of the information available to more people.''

As of next year, AFL-CIO members will be offered one of two credit card plans now being discussed. In the first, the card has no annual membership fee and has a variable interest rate for outstanding balances set at five percentage points above prime, which would put the cards at 13.5 percent now.

The second option also ties the rate to the prime, but sets it at 7.25 percent over that benchmark, which would give the cards a current rate of 15.75 percent. But this option also includes a 25-day grace period without an interest charge and a sliding scale of annual fees, with lower fees for those who use the card more.

The union's action is particularly encouraging to Mr. Pollock, because it will present the idea of lower credit card rates to many people who earn less than $30,000. In a recent survey, his organization found that less than half of this income group was likely to shop widely for a bank credit card.

Pollock hopes more widespread availability of information about lower rates will encourage these people to compare the rates and terms offered by banks as well as the union.

But it's still up to the consumer to do the comparing. ``Obviously, I think [the AFL-CIO card] will put some pressure on the banks,'' says Jerry Walsh, spokesman for the American Institute of Certified Public Accountants, which recently published a brochure on selecting a credit card. ``But I really think it's up to the individual consumer to do their homework.''

The brochure, which is called ``Choosing a Credit Card? These 25 Tips May Save You Money,'' is available free of charge by sending a long, stamped, self-addressed envelope to Choosing a Credit Card, American Institute of Certified Public Accountants, Box 1003, New York, N.Y. 10108.

``If people shopped around, you'd see a lot more rates coming down,'' Mr. Walsh says.

A banker quoted in a recent issue of Bank Credit Card Observer seems to back this up. His bank charges 19.8 percent. ``There's been no serious objection from customers,'' he said. ``If there were we'd respond to it.''

In addition to lower rates and fees and longer grace periods, credit card shoppers may find some new twists that could work to their advantage. First, some of those banks offering very low rates are asking for more credit information. Pollock recently applied for a card at Simmons First National Bank in Pine Bluff, Ark., where the rate is 11.5 percent. ``I had to supply a lot more credit history, but I don't mind that,'' he says.

At Home Plan Savings in Des Moines, the rate was cut to 12.9 percent for customers with good credit records and incomes of at least $15,000, or $24,000 for a couple. Others pay 17.9 percent.

Pollock says that other banks have lowered the rates for customers who keep a minimum amount in another account at the bank, like a savings account, an individual retirement account, or a certificate of deposit.

If bankers are indeed ready to respond when they see credit card shoppers taking their business elsewhere, maybe now is the time to see what happens when consumers give it a try.