Credit is flowing and card issuers are beating the bushes
Ever heard of a bank credit card called More Visa? Neither had a colleague here, who wondered if the mailing he had received about the card could be for real. The pitch was this: no annual fee to pay, a preapproved $2,500 line of credit, monthly payments lower than with other bank cards, and an automatic $500 cash advance.Skip to next paragraph
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The card, it turns out, is backed by Credit Thrift Financial Inc., in Evansville, Ind. Credit Thrift, a subsidiary of American General Corporation, an insurance firm, is one of nearly 400 companies that see opportunities in plastic cards. In the past two years a pile of them have entered the market, heightening competition that results in new services and financial terms for consumers.
New entrants seem to be aiming directly where you feel it most - your wallet. The major players in the business, such as Citicorp, Chase Manhattan, Bank of America, and American Express, are fighting it out over services - free travel insurance, cash machines, message services, club memberships, and rebates on consumer products.
Direct-mail credit card solicitations have been heavy for the last two years or so - ever since interest rates climbed down from all-time highs in 1981 and consumers began to feel comfortable again with the phrase ''charge it.'' Now that it's autumn, expect to see more credit card mail promotions. The companies are trying to sign you up in time for Christmas shopping.
With so many issuers peddling cards, ''it's easier to get credit because there's more of it available,'' says James Gudinas, managing director of financial services at the American Automobile Association, which backs a Visa card.
But Roberta Serafini, a certified financial planner in Boston, warns that ''you should read all the material'' in a promotion package before signing up. While the sales pitch may play up savings, it could also neglect to mention other costs.
For instance, the More Visa letter promised there's no annual fee, but it said nothing about finance charges. A call to the company uncovered an annual finance charge of 21.9 percent. The national average is 18.2 percent, according to Spencer Nilson, an authority on the credit card industry. Finance-charge ceilings vary from state to state, but since Credit Thrift issues all cards through a single bank in Columbus, Ohio, it can apply that state's interest rate nationwide. It's up to users to review their charging patterns and figure out if saving a $20 annual fee outweighs a new, higher finance charge.
The More letter also promises an automatic $500 cash advance as soon as the customer signs on - an advance that also runs a 21.9 percent financing charge, although the letter doesn't say so. While you get the check automatically, you are free, of course, not to cash it.
The question arises, just what is Credit Thrift? Is it ''safe'' to do business with? Ray Lasher, vice-president of marketing there, assures us it is. He emphasizes that the parent company is the fourth-largest insurance firm in the country.