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

DATE: TUESDAY, November 28, 1995                   TAG: 9511280135
SECTION: NATL/INTL                    PAGE: A1   EDITION: METRO 
SOURCE: BRUCE MOHL THE BOSTON GLOBE
DATELINE:                                 LENGTH: Medium

GO ON AND PAY YOUR CREDIT CARD BILL; YOU OWE IT TO YOURSELF

\ Don't miss a credit card payment this holiday season, or you may end up with a higher interest rate.

Banks increasingly are imposing so-called punitive rates on customers who miss payments or exceed their credit limits. And at least one bank has a policy of raising the interest rate of any customer whose overall credit situation deteriorates.

At Citibank, the standard $15 penalty for making late payments or exceeding the credit limit can be supplemented by a 3 1/2-point increase in the customer's interest rate for six months. The AT&T Universal Card operates the same way, except the rate increase is 2 points for a year. Discover, MBNA America and other banks also boost rates in certain cases.

The credit card companies say they generally raise a customer's interest rate only if there is a pattern of violations, but the rules are vague. Exceeding your credit limit in most cases requires the approval of the credit card company - which may authorize the charge, then penalize you anyway.

Bank officials say they are trying to respond to a growing problem in a way that affects as few customers as possible.

``We had a choice,'' said AT&T spokesman Mitch Montagne. ``We could spread the costs of late payments over our entire customer base or ask those who incur the costs to pay for them.'

Punitive interest rates are part of a trend toward risk-based pricing. Credit card debt is expanding faster than just about anyone anticipated. Americans are expected to charge 24 percent more this year than last, with total volume easily exceeding $700 billion. RAM Research Group of Frederick, Md., projects holiday spending charges alone will total $120 billion.

With the growth in personal income failing to keep pace with the growth in credit card debt, late payments and defaults are becoming more common. According to the American Bankers Association, the number of credit card accounts that are 30 days or more late hit 3.26 percent at the end of June, the fourth-highest level in a decade.

Bank officials say they slap customers with higher interest rates only if violations become a persistent problem. But many credit card agreements give the banks the power to raise rates after just one violation or if the customer fails to keep the account in ``good standing.'' Some banks don't even notify the customer before raising the interest rate.

``There is no standard rule,'' said Montagne of AT&T. ``Each case is taken individually.''

Consumers are urged to read the fine print of their credit card agreement to see if their company has the power to hike interest rates if a payment is late. To avoid late charges and higher rates, consumers should pay at least the minimum amount on their balance each month.

Capital One uses the most extreme risk-based approach. Twice a year the company analyzes customers and adjusts interest rates accordingly. Some customers' rates have doubled.