Variable-Rate Charge Cards Are Bargain : Credit: Interest on them is about half of the 18.22% average of fixed-rate cards.

Variable-rate credit cards are offering consumers bargains as interest rates fall to the lowest levels in two decades.

At the end of last year, about 34% of the 280 million credit cards in circulation had variable interest rates, said Robert McKinley, president of Ram Research Corp. in Frederick, Md., a company which follows the credit card industry. That’s up from 26% the year earlier.

“It would not be surprising to see half of the credit card accounts with variable rates by the end of the year,” said Jerry Craft, president of Wachovia Bank Card Services in Atlanta.

Many credit card companies offer rates based on the banking industry’s prime lending rate, plus a certain fixed percentage.

Wachovia Corp., one of the nation’s top 25 credit card issuers, last week dropped its variable interest rate to 8.9% for its so-called prime-plus Visa or Mastercard. That is among the lowest rates offered by a national card issuer.

Wachovia charges 2.9 percentage points above the prime rate for its prime plus card. Other variable rates are based on Treasury bills or other interest rate benchmarks. Those rates usually are adjusted at the end of the quarter, but Wachovia adjusts its rates monthly.

Industrywide, credit card interest rates have barely moved when compared to the dramatic cuts in other interest rates the past two years. The average credit card interest rate nationwide is 18.22%.

That average is weighted according to the market share of the largest issuers, McKinley said. Credit card rates remained in the 18% range throughout the 1980s.

But consumers have found bargains in variable-rate cards because the Federal Reserve has dramatically cut interest rates the last two years to help spur the economy. The banking industry’s prime lending rate, for example, has dropped 4 percentage points to 6% in the last 1 1/2 years.

Several consumer groups provide lists of credit cards with low rates issued on a nationwide basis.

At Norwest Corp., a large Minnesota bank, McKinley said most card holders saw their rates drop 3.8 percentage points to 15% in the past six weeks. That’s because Norwest switched to a variable interest rate in June.

American Telephone & Telegraph Co. launched a variable rate for its Universal Card in March, 1990. Since then, more than 8 million accounts have been opened for the card, which has a rate of 15.4%, the company said.

Many more credit card companies will begin offering variable-rate cards as they attempt to lure new customers and retain their existing base, said McKinley.

Scott P. Marks, executive vice president in charge of First Chicago Corp.’s credit card business, said the variable-rate card has been a key part of the company’s strategy since 1988.

The number of customers cutting up First Chicago credit cards and switching to another brand is at “an all-time low,” Marks said. First Chicago is the nation’s sixth largest card issuer.

McKinley and others say consumers don’t face huge risks if interest rates begin to rise. With some rates below 10%, it would take a huge leap in interest rates before credit card interest would exceed the 18% level.