
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: WEDNESDAY, July 13, 1994                   TAG: 9408050003
SECTION: BUSINESS                    PAGE: C8   EDITION: METRO 
SOURCE: Knight-Ridder Newspapers
DATELINE:                                 LENGTH: Medium

CREDIT-CARD SMORGASBORD OFFERS REWARDS ... AT A PRICE

After a two-year price war that helped nudge credit-card rates to a record low, issuers increasingly are shifting the battle over your wallet to a new front, creating more consumer choice - and confusion - than ever before.

These days your mailbox is likely to bulge with offers from some sources that would have been unthinkable even five years ago, each tempting you to pass up lower interest rates by dangling a ``reward'' of something they make or sell.

``No industry is off limits,'' proclaimed Brad Hennig, spokesman for Visa in Foster City, Calif.

Indeed, General Motors will kick back thousands on a new car, while retailers Nordstrom, Sharper Image and manufacturer Apple Computer gives breaks on the price of leather shoes, vibrating chairs and personal computers. Shell Oil will give free gas, and virtually every airline will give a free ride to holders of their credit cards.

Such offers have proven so popular, in fact, that even banks that issue cards are getting in on the act. Wells Fargo Bank will discount a mortgage, while NationsBank will deposit cash in an annuity for retirement.

And if you are willing to make a commitment that lasts longer than many marriages, Mellon Bank will refund all the interest you pay over the next 20 years, providing you are willing to wait until 2014 to get it.

``Applying for a credit card might be like making a hoagie,'' said Robert B. McKinley, president of RAM Research Corp., which tracks the credit-card industry. ``Do you want air miles? Do you want a rebate? Do you want a low interest rate? You can design it yourself.''

The reward can be substantial for atypical consumers who roll up hefty credit-card bills but pay them off promptly so they incur no interest charges.

For instance, to max out the $3,500 rebate on GM's standard card, users must charge $10,000 annually over seven years - four times the $2,500 annual charge level of the average user. With no interest costs, the main cost then is the often steep annual fees.

``Those are the select few people who can get something for nothing,'' said Ruth Susswein, executive director of Bankcard Holders of America, a nonprofit consumer education group.

But that excludes the nearly 70 percent of cardholders who do not pay off their monthly balances fully.

For them, the interest clock is running, and with an average balance of $1,700 per account, each tick erodes the benefit of a co-branded card.

If you number yourself in that majority, by analyzing your past credit card bills, you might find the interest charges would outweigh the value of the rewards or rebates entirely. In that case, you would be better off simply applying for an old-fashioned, low-rate, low-fee card.

Consumers with average credit records can expect to qualify for a card charging 12 to 14 percent, and top-rated consumers can get cards at less than 7 percent, said McKinley. But co-branded cards - which usually are tied to the recently rising prime rate - are settling in at about 17 percent.

by CNB