At Least 28 Credit Cards in State Offer Rates Below 16%

Credit card interest rates have risen in the past year, but there still are at least 28 cards available to California residents with rates at or below 16%, according to a survey released today.

Interest rates on at least six cards offered by California institutions were raised in the past year, said Consumer Action, a San Francisco organization that tracks banking rates statewide. None of 37 California banks and savings and loans surveyed lowered their rates.

But at least 10 cards offered by California institutions and at least 18 from out-of-state firms offer rates at 16% or below--evidence that consumers can still find good deals if they shop around, Consumer Action executive director Ken McEldowney said.

“It’s not like it used to be when there were just one or two” cards with relatively low rates, he said.

These figures are for so-called unsecured credit cards, those not backed by a savings account for collateral. Interest rates for secured cards, which are less common, are much lower.

The rising rates in California mirror an upward trend nationwide, mostly due to higher interest rates in the economy in general. The higher rates tend to be in variable-rate cards pegged to the bank prime lending rate or to Treasury bills, which have jumped this year.

More Paying Off Balances

Average rates on unsecured cards offered by the nation’s 100 largest issuers have edged up to 18.62% from 18.08% a year ago, according to RAM Research Publishing, a Frederick, Md., firm that tracks credit card data.

The rising rates also come as more card holders--about 41% of them, compared to about 36% a year ago--are paying off balances before incurring interest charges, said Robert B. McKinley, RAM Research publisher and editor. Consumers are doing this largely because tax reform is phasing out tax deductions for interest expenses on credit cards and other non-mortgage borrowings.

Such a trend has started to squeeze the profits of card issuers, prompting some of them across the country to try to make up for lost revenues by raising annual fees or other charges, McKinley said.

For example, Arkansas Federal Savings of Little Rock, whose 10.92% rate is the nation’s lowest, and People’s Bank in Bridgeport, Conn., whose 12.5% rate is the second lowest, both raised annual fees in September, McKinley said.

Some card issuers may also begin to shorten the grace periods during which borrowers do not incur interest charges, McKinley predicted.

The Consumer Action survey showed that two California institutions--Home Savings and Mitsubishi Bank--raised annual fees in the past year.

Of the 10 California cards with interest rates of 16% or below, the lowest was Sacramento Savings at 12.75%. But that institution offers cards only to residents of a few Northern California counties. The lowest rate generally available to all California residents was 13.75% at Empire of America Savings Bank.

However, some low-rate cards are offered only with restrictions--such as requiring another account at the issuing institution--or without grace periods, meaning that borrowers start incurring interest charges as soon as they make a purchase with a credit card.

The Consumer Action survey also found that:

Annual fees range from none on cards issued by El Segundo First National Bank and Imperial Savings to $25 for the cards of Wells Fargo Bank, First Interstate Bank of California and for another card at Imperial Savings.

Rates in California on secured cards range from 7% at Heart Federal Savings in Auburn to 18% at Charter Savings Bank in Huntington Beach and Placer Savings in Auburn.

Ten of 11 California credit unions surveyed offer cards below 16%.

Copies of the survey, with information accurate as of Sept. 6, can be obtained free of charge by sending a stamped, self-addressed, business-size envelope with 45 cents postage to: Consumer Action Credit Card Survey, 693 Mission St., San Francisco, Calif. 94105.

GETTING A DEAL ON CREDIT

These nine California banks and savings and loans offer credit cards (Visa and MasterCard) at annual percentage rates of 16% or less.

Annual Grace Annual percentage period Institution fee rate (days) American S&L; $15 15.00 25 Bank of Canton 15 14.00 20 Continental Savings 10 16.00 25 El Segundo First National* none 14.00 25 Empire of America 18 13.75 none Guarantee S&L; 13 15.00 none Imperial S&L; 25 15.59* 25 15 15.00 25 Sacramento S&L; 20 12.75* 25 San Francisco Federal S&L; 21 15.00* 25

* Variable rate

* Requires an existing account

Source: Consumer Action