Push for new credit cards calls for old wisdom in their use

Exercise showman Richard Simmons bought his mother a stationary bike. James Doohan -- ``Scottie'' from ``Star Trek'' -- beams open his garage with a new door opener. And spookmaster Vincent Price is wickedly enthralled with his blue-lighted bug zapper. These and other stars are enjoying their new toys thanks to the ``Citidollars'' they earned by using Citicorp's Visa and MasterCard. Their television ads are part of the banking giant's nationwide drive to slip its plastic into Americans' wallets.

At the same time, a new generation of credit cards is being born. The parents of these cards include such major companies as Sears, Roebuck & Co., Shell Oil Company, and Amoco Corporation.

Was this what that partygoer in ``The Graduate'' was thinking when he told Dustin Hoffman that his future lay in ``plastics''?

It may have been, and consumers are apt to become as confused about which cards do what and their costs as Mr. Hoffman's character was about his future.

Earlier this month, Sears flexed its advertising muscle to begin touting the new Discover card in Atlanta and San Diego. Unlike the ubiquitous little Sears charge card that is good only for purchases at Sears stores, Discover can also be used to make purchases at non-Sears retailers, to gain cash-advance access at a national automatic teller machine network, and to get cash advances or cash checks at Sears stores.

For the first two years, the Discover card will be free, but outstanding balances of 30 days or more will be charged interest at an annual rate of 19.8 percent.

At Shell, letters are going out to its ``most active and creditworthy'' cardholders inviting them to sign on for the Shell Signature card. In addition to Shell's service stations, the card provides access to restaurants, hotels and motels (where discounts are available), and Hertz car rental offices (with discounts here, too). The card also provides small cash advances and travel accident insurance.

Other entries in the field of credit cards with expanded features include Amoco Corporation, which is adding more services to its existing MultiCard, and Household International Inc., which is heavily marketing its HomeCard, which helps customers get discounts on brand-name items, income tax preparation, and new car purchases.

Do these new cards, along with the push by banks to send out more cards, mean retailers and banks are leading consumers down a road to heavy debt, enticing them with even more ways to end up in bankruptcy?

Most evidence indicates this will not be the case, but some caution in adding to your population of credit cards is probably well advised.

``I've never had any great concern about consumers misusing credit cards,'' says H. Spencer Nilson, publisher of The Nilson Report, a Los Angles newsletter that follows the credit card business. Many of his subscribers are employed by banks, retailers, and other card issuers. ``There's no justification for anyone to predict a climb in debt because there are more cards. Consumer debt is going up at the same rate as overall income.''

But Marla Kaplan, associate director of the Bankcard Holders of America, a nonprofit organization in Washington, is concerned that all these new credit cards -- often pre-approved and obtainable with just a signature -- could be too much for some people.

``The chance of going in over your head is growing tremendously,'' she says. Some people, she notes, like to collect credit cards. While this may not be a problem for all consumers, there can be dangers.

For one thing, she says, people sometimes lose track of how much they have charged. Suddenly, they find themselves several thousand dollars in debt and able to do nothing but make minimum payments. These payments may be small, but you could be adding a few hundred dollars of interest to your other annual expenses.

``The banks want to make sure you can pay the minimum,'' she observes. ``But they really have no interest in seeing you pay in full.''

Another danger, Ms. Kaplan says, is that a lot of credit cards could make it more difficult to obtain a loan from a non-credit card source. When personal loan rates are higher than credit card rates, as they were a few years ago, then borrowing money on a credit card makes sense.

That is not the case now, so if you want a straight cash loan from a bank, for a car, for example, the lender may take into consideration how many credit cards you have. If you have several cards, each with a credit limit of a few thousand dollars, the lender may decide you have too much ``potential'' debt.

``Some creditors will look at that in considering an application,'' agreed Delia Fernandez, spokeswoman for TRW Information Services, the credit rating division of TRW Inc.

If you don't want a wallet overpopulated with credit cards or too much potential credit, Ms. Kaplan suggests a periodic inventory. If you get a letter inviting you to sign up for one of the new credit cards, see if there is an old card you can cancel. ``Most people aren't canceling old cards when they get a new one,'' she said.

Also, see how much interest you're paying. Until recently, almost all credit cards charged 18 percent. That has changed. Some banks are charging 19.5 percent. A few are even charging 20 to 21 percent. But in an an effort to be more competitive, a few others have dropped their rate to the 17 percent area. Unless you've been watching closely, the rate on your cards may have changed without your being aware of it.

If you have a question that would make a good subject for this column, please send it to Moneywise, The Christian Science Monitor, One Norway Street, Boston, Mass. 02115. No personal replies can be given by mail or phone. References to investments are not an endorsement or recommendation by this newspaper.