Credit-Card Interest Rates in California Are Beginning to Head Down, Survey Finds

Although California savings institutions still charge among the nation’s highest credit-card interest rates, a small but growing number are dropping their rates, with some going as low as 14.9%, according to a survey to be released today.

In addition, cards secured by savings accounts or other consumer deposits have rates as low as 7% in California, the survey said. And some out-of-state institutions are offering rates on unsecured accounts as low as 11%.

Such variance “indicates that shopping around for the best interest rate becomes more important,” said Sheila Kolenc, staff researcher at Consumer Action, a San Francisco-based consumer group that conducted the survey.

The study comes amid continuing concern among consumer groups and lawmakers about continuing high credit-card interest rates at a time when rates on mortgages, auto loans and other borrowing have fallen. They note that profits on credit cards have been generally higher than on other types of lending.

Card issuers, however, contend that costs of administering credit cards are much higher than for other loans and that issuers are making up for losses suffered on cards in the early 1980s amid high rates on deposits and other sources of lendable funds.

But while rates in California have begun to fall in recent months, they are not tumbling as widely or as far as elsewhere in the nation, Consumer Action said. Some other states, such as Arkansas and Texas, have usury laws that limit how high rates can go, Kolenc said.

Also, “Californians don’t shop as much for lower interest rates,” she said, noting that many consumers remain loyal to such large institutions as Bank of America, Security Pacific National Bank, Wells Fargo Bank and First Interstate Bank of California that charge among the highest rates in the nation.

The survey of 99 institutions, current as of Aug. 18, shows a range of between 14.9% and 21% for unsecured credit cards in California, compared to between 17.5% and 21% in its 1985 survey (although that survey used a somewhat different list of companies). Six of the 16 institutions surveyed both this year and last have lowered their rates, Kolenc said, including American Savings (to 15% from 18%) and Home Savings of America (to 16% from 20.4%, although holders must maintain a deposit account).

The least expensive unsecured cards among banks and savings and loan firms surveyed are issued by Santa Barbara Savings at 14.9%; American Savings and Sacramento Savings, both at 15%, and Continental Savings at 16%. The highest rates were found at First Interstate Bank and County Bank & Trust, both at 21%.

The survey also found that:

- Cards secured by regular savings accounts offer among the lowest rates in the state, although rates have risen recently. Issuers with the lowest rates on secured cards include Heart Federal Savings at 7%; Time Savings and United Savings Bank, both at 7.5%, and East-West Federal Savings Bank, Pacific Coast Savings and Cal America Savings, all at 8%.

- Credit unions generally offer lower rates and fees than banks and S&Ls.; Seven surveyed credit unions all had rates at 17% or less, with California State Employees Credit Union the lowest at 14.9%.

- Variable-rate cards are now offered in the state. New York-based Marine Midland Bank, which issues cards offered by about 200 California institutions, offers a variable rate as an option on its cards. The rate is currently 16.95%.

- Many out-of-state institutions offering low rates do not offer cards to Californians. However, those that do--such as Simmons First National Bank and Union National Bank, both based in Pine Bluff, Ark.--offer rates as low as 11%.

Consumer Action, however, cautioned that low interest rates are only one of several factors to consider concerning credit cards; others include annual fees, grace periods, late-payment fees and fees for exceeding the credit limit. The survey noted that most institutions surveyed have late-payment fees of $5 or 5%, and $10 charges for exceeding the credit limit.