Rates Drop as Credit Cards Get Competitive

Interest rates on Visa and Master Cards have dropped, a study released Monday indicated, and analysts said the development shows that the credit card industry is becoming increasingly competitive.

The American Bankers Assn. said during its annual meeting in Nashville that a survey of 453 banks shows interest rates on Visa and Master Cards decreased to an average range of 16.7% to 17.8% last year, compared to an average range of 16.4% to 18.5% in 1987.

The survey also showed that consumers are paying less in annual fees. The membership rates dropped from an average range of $15 to $17 this past year from $15.60 to $18.20 in 1987.

“The survey results mirror the intense competition in the bank card market today,” said Robert H. Burke, chairman of the trade association’s bank card division. “The range of choices for consumers today has never been greater and bank prices reflect that.”

As part of a sweepstakes to promote its regular credit card, Visa U.S.A. introduced a one-of-a-kind card with a $1-million limit at the meeting.

Spokesmen said consumers who use their Visa cards in the next three months will automatically be entered into the national sweepstakes. The winner of the million-dollar card, to be picked in January, will be able to charge $200,000 a year over the next five years without being billed by the company.

Analysts said the gimmick is another reflection of the increasingly competitive nature in the credit card business.

“The industry has become more mature in that just about everyone has a credit card now,” said Ben Palmer, who follows financial institutions for Arthur Anderson & Co. in Atlanta.

“The market share is not increased by offering new cards but by enticing people who have cards already to use yours--by lowering fees, lowering interest rates and offering sweepstakes,” he said.

The survey also found that the average charge on a bank card increased to $63 from $60 during the period studied and outstanding balances increased to an average range of $1,175 to $1,201 in 1988 from an average range of $1,083 to $1,105 the year before.

But fewer Americans are letting their credit cards run up high interest rates. Cardholders are paying their bills more promptly.