The state's largest credit union cut the interest rate on its Visa credit cards yesterday by more than 2 percentage points in a move that reflects a growing national trend.
The State Employees Credit Union, whose 130,000 members are mostly state employees and their families, cut its Visa rate to 12.9 percent from 15 percent, credit union President William M. Griffin said.
Mr. Griffin said the Towson-based credit union, which has more than $500 million in assets, wanted to give state workers "a little more oomph for their money" in response to a recession that has hit hard at state employment rolls.
Robert McKinley, president of RAM Research Corp., which follows the national credit card industry, says average rates have finally begun to dip after months of criticism prompted by the contrast between stubbornly high credit card rates and falling bank lending rates.
While most big issuers have stuck to 19.8 percent credit card rates, the number of low-rate cards has more than doubled in the last year, the Frederick-based consultant said. The moves of smaller issuers have pushed the national average credit card rate, covering 107 issuers with a combined 93 percent market share, down to 17.95 percent from 18.42 percent last January, he said.
"There have been more rate changes this January than in a long time," he said. "When you get below the top 10 issuers, that's where the bargain rates surface. . . . Consumer perception is taking credit card interest rates much more seriously."
Mr. McKinley said data from last year show low-interest credit cards gaining market share at the expense of pricier cards, but those surveys cover only the first half of 1991 and don't show how consumers are reacting to sharp cuts in other interest rates since June.
Mr. McKinley said there are now 228 credit cards on the market with rates below 15 percent, up from only 105 at this time last year.
Bill Ahearn, a spokesman for Citicorp, the nation's biggest credit card issuer, said there are about 6,000 different bank credit cards on the market. He said Citicorp has kept rates on most of its cards at 19.8 percent partly because of higher loan losses and bankruptcies caused by the recession.
He also insists that the cost of funds for credit card loans, which are funded by bonds rather than bank deposits, hasn't fallen as much as deposit rates or the prime rate because buyers of these bonds assume some of the default risk and demand higher returns.
Mr. Griffin said a credit union has a lower cost of funds than a bank or thrift because its credit card operation is funded by deposits.
Both Mr. McKinley and Mr. Ahearn agreed that delinquencies and loan losses on credit cards have stopped rising.
Mr. Ahearn said Citicorp has changed the rate on its Choice Visa card, whose administrative offices are in Towson. Choice cardholders used to pay 16.9 percent on balances up to $1,300 and 14.9 percent on any remaining amount. The new rate is 15.9 percent on all balances, which benefits consumers who have small balances.