Menu
Not-So-Fantastic Plastic - problems with low-rate credit cards
Joan GoldwasserThe lowest-rate credit card isn't always the best choice.
Credit card shoppers live by a long-standing motto: Go for the lowest rate if you carry a balance and for no annual fee if you don't. But that rule of thumb has developed a hangnail. The cards with the lowest rates and no annual fees are sometimes the ones with the most punitive nuisance fees--and the quickest trigger fingers.
"We've been getting tons of complaints," says Linda Sherry of Consumer Action, a consumer-advocacy group in San Francisco. Your complaints have reached us at Kiplinger's, too, about certain issuers that have appeared on our monthly list of low-rate and no-fee credit cards.
For instance, William Haburn of Salem, Ore., is one of several First USA cardholders who say they've been charged a late fee (usually $29) despite mailing payments at least a week in advance. (Some, like Haburn, have successfully disputed the charges.) Part of the problem is that First USA generally gives you lust 20 days between the end of your billing cycle and the payment due date, including round-trip mailing time. In effect, First USA subtracts another day by requiring your payment to arrive by 10 A.M. in order to be posted the same day.
DISAPPEARING DEALS. Low rates that leap unexpectedly are another source of cardholder complaints. Huntington Bank, also a regular on our low-fee list, sold many of its credit card accounts last fall to Direct Merchants Bank in Arizona, which raised interest rates from 8.5% to 17.4%. And Pulaski Bank, which had topped our list of low-rate cards for two years, raised its rate in January from 7.99% to 9.45%. All a card issuer must do before changing the rate--or any other terms--is give you 15 days' written notice.
Sometimes how you use your card can spark a rate hike. Todd Salter of Austin, Tex., saw the rate on his Associates Bank card jump from 14% to 20.99% when his balance rose from $1,500 to $2,000. Bank One boosts its rate from 9.99% to 19.99% if you are late twice in a six-month period.
With some exceptions, low-rate cards also tend to have high fees for exceeding your credit limit and taking out a cash advance. Capital One, for instance, charges just 9.9% on regular balances, but the interest rate is 19.8% on cash advances, on top of a 2.5% cash-advance fee.
To help you avoid back-door credit card expenses, we've revised our criteria for choosing the credit cards we highlight each month as Best Deals (see the table). We'll still favor low-interest-rate cards. But we will weed out cards with excessive fees for paying late or exceeding your credit limit and will take cash-advance fees and grace periods into account. And we will exclude cards that have prompted frequent complaints for customer-unfriendly practices, such as being too eager to assess late fees.
BEST DEALS
Low-interest premium cards Best if you carry a balance
RECENT RATE
ISSUER (INDEX+MARGIN)
USAA Savings (G,P) 8.75% (prime(*) + 1)
Pulaski Bank & Trust (G) 9.45 (discount(**) + 4.95)
Huntington National (G) 8.75 (prime + 1)
No-fee premium cards Best if you usually pay the balance each month
RECENT RATE
ISSUER (INDEX+MARGIN)
AFBA Industrial (G) 11.4% (prime + 3.65)
USAA Savings (G,P) 11.65 (prime + 3.9)
Amalgamated (G) 12.25 (prime + 4.5)
Rebate cards Best of the cash-back cards
RECENT RATE
ISSUER (INDEX+MARGIN)
Amex Cash Back (P) 17.74% (prime + 9.99)
Jefferson Smart Visa 15 (prime + 7.25)
Waterhouse National([dagger]) 12.5 (prime + 4.75)
Low-interest premium cards Best if you carry a balance
CASH-ADVANCE ANNUAL LATE/
ISSUER RATE/FEE(c) FEE OVER LIMIT
USAA Savings (G,P) 8.75%/none 45 $20/none
Pulaski Bank & Trust (G) 9.45/none 50 20/$20
Huntington National (G) 8.75/2%- 49 15-25/20-25
No-fee premium cards Best if you usually pay the balance each month
CASH-ADVANCE GRACE LATE/
ISSUER RATE/FEE(c) PERIOD OVER LIMIT
AFBA Industrial (G) 11.4%/2% 25 days $20/none
USAA Savings (G,P) 11.65/none 25 days 20/none
Amalgamated (G) 12.25/2 25 days 25/$20
Rebate cards Best of the cash-back cards
CASH-ADVANCE ANNUAL REBATE ON
ISSUER RATE/FEE(c) FEE 12,000
Amex Cash Back (P) 20.65%/2% none 125
Jefferson Smart Visa 15/2 25 120
Waterhouse National([dagger]) 12.5/2 none 120
Low-interest premium cards Best if you carry a balance
TELEPHONE
ISSUER NUMBER
USAA Savings (G,P) 800-922-9092
Pulaski Bank & Trust (G) 800-980-2265
Huntington National (G) 800-480-2265
No-fee premium cards Best if you usually pay the balance each month
TELEPHONE
ISSUER NUMBER
AFBA Industrial (G) 800-776-2265
USAA Savings (G,P) 800-922-9092
Amalgamated (G) 800-723-0303
Rebate cards Best of the cash-back cards
REBATE TELEPHONE
ISSUER TERMS NUMBER
Amex Cash Back (P) up to 2% 800-843-2273
Jefferson Smart Visa 1% 800-443-5757
Waterhouse National([dagger]) 1% 888-327-9962
(c) Cash advances frequently have no grace period; additional fees may be charged. (G) gold card (P) platinum card (*) 7.75% as of March 10 (**) 4.5% as of March 10 ([dagger]) need Waterhouse account to open
SOURCE FOR LOAN RATES AND CREDIT CARDS: Bank Rate Monitor, N. Palm Beach, Fla.
We've also added a new section to our credit card tables--a rotating selection of rebate credit cards. This month: cash-back cards.
COPYRIGHT 1999 The Kiplinger Washington Editors, Inc.
COPYRIGHT 2000 Gale Group
credit card, apply online for credit card, apply for a credit card, 0 apr credit card, business credit card, credit card debt, credit card application, online credit card approval, chase credit card, credit card processing, low apr credit card, credit card debt consolidation, travel reward credit card, bad credit credit card, credit card offer, student credit card
test.com Site Map