ROANOKE TIMES 
                      Copyright (c) 1996, Roanoke Times

DATE: Tuesday, November 5, 1996              TAG: 9611050077
SECTION: BUSINESS                 PAGE: B-6  EDITION: METRO 
DATELINE: NEW YORK
SOURCE: Associated Press


AT&T CUTS ITS CREDIT CARD RATE FARE WARS, GAS WARS: ARE CARD WARS NEXT?

In the spirit of air fare wars and gasoline wars, a brawl may be shaping up among credit card purveyors, just in time for the holiday shopping rush.

The credit card business of AT&T Corp., the nation's second-largest issuer of plastic, is offering its best customers sharply lower interest rates, gambling that this will entice more consumers to pull out their AT&T card instead of another brand when they charge Christmas gifts. Other cards are expected to follow.

``It's a move for wallet share,'' said Mitchell Montagna, a spokesman for AT&T Universal.

In a letter to customers last week, AT&T Universal said it would reduce the interest rate on its credit cards to 13.85 percent - a drop of 4.3 percentage points for AT&T's most expensive card, from its current 18.15 percent. The new rate, effective Dec. 1, will remain 5.6 percentage points over the prime lending rate.

Consumer advocates, including Stephen Brobeck, executive director of the Consumers Federation of America, said AT&T's move proved that credit card issuers have room to lower their rates without compromising profitability.

``Credit card rates are extremely high, given the cost of credit to banks,'' Brobeck said. And ``it's another indication that inflation is under control and interest rates are stable. If AT&T thought their cost of funds was going up, it would not be lowering their interest rate. It is not a stupid company.''

Robert McKinley of Ram Research Corp. said AT&T's rate cut also was an attempt to get cardholders to carry balances over month to month, an area that has presented some problems for the company. About half of AT&T card users avoid interest charges by paying off their balances every month, compared with 40 percent for the industry at large, he said.


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by CNB