Credit-Card Rates On The Rise? Not At These Banks


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When President Obama signed the Credit CARD Act into law last May, industry analysts predicted that tighter, consumer-friendly regulations would force banks to hike credit-card interest rates for everybody.

They were, of course, right.

In the months leading up to February 2010, it seemed the banks had engaged in a rate-hike race in preparation of the new credit-card rules, which would prohibit “any time, any reason” interest-rate increases.

According to the 2009 Credit Card Survey by advocacy organization Consumer Action, the big banks hiked interest rates noticeably between March and June 2009. Bank of America (BAC) added 3.25 percentage points to its minimum APR for purchases (from 6.99% to 10.24%); Citibank (C) did the same on three of its cards.

A more recent report backs that trend further. As the Wall Street Journal reported on Monday, average credit-card rates on new cards have climbed to 14.7%, from 13.1% a year earlier. According to research firm Synovate, which supplied the statistics, this is the highest average reported since 2001. The gap between that average and the Prime rate, which credit-card rates are pegged to, is now the highest it’s been in at least 22 years.

Rate hikes have been in the news frequently in the past year, not to mention limit cuts, fees and account closures.

What hasn’t been making headlines nearly as much? The fact that there are still some banks out there offering credit cards with single-digit interest rates, some as low as 6%.

You will not find their names on the top 10 banks list. You will not see them in TV commercials and, most likely, you will not read about them in the newspaper.

Why? Probably because they’re kind of boring. They didn’t jack up their rates in the past year. They didn’t introduce a mindboggling concoction of new fees. They didn’t even tighten their lending standards: those were tight to begin with, says Curtis Arnold, the founder of, a credit-card comparison website.

Take Simmons First National Corporation (SFNC), whose eight affiliate banks operate in 40 communities in Arkansas and one in Missouri. Simmons First’s Visa Platinum credit card now has a 7.25% variable rate.

At the height of the lending boom, Simmons required that credit-card applicants supply a copy of their paystubs, a practice that “for the big boys was laughable,” Arnold says.

Iberiabank (IBKC), headquartered in Louisiana and also operating branches in Alabama and Florida, is another example: its Visa Classic card has an APR as low as 7.25%, while its Visa Select card offers 0% APR on purchases for up to 12 months, as low as 7.5% thereafter.

You might be able to do even better at your credit union. Arkansas Federal Credit Union offers a Visa credit card with APR starting at 6%.

Pentagon Federal Credit Union’s PenFed Promise card comes with a 7.49% rate for the first 36 months. After that, it will vary with the Prime rate, and is now as low as 9.99%.

All of these cards are plain and frill-free to the point of boring. They don’t offer miles, cash back or rewards points on every dollar you spend; they generally don’t offer enticing 0% APR balance-transfer or cash-advance checks.

And they’re very demanding. Per those tight lending standards we mentioned above: you would generally need a credit score in the 700s, a steady income, and in the case of credit union cards, you’d have to be a credit-union member.

But if all you’re looking for is a simple, back-to-basics product that can help you pay off existing debts faster at lower rates, those cards are something to consider. True to their no-frills nature, many of them have no balance transfer fees: a plus when you consider that these days some banks will charge you as much as 5% of the transfered balance.

If you need a new credit card, “don’t just assume that the big boys are the only game in town,” Arnold says. “Check your own back yard.”

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