he credit card industry always has had one foot on Wall Street and the other on a fashion runway. While cardholders are a commodity as heavily watched and traded among credit card issuers as any stock, they're also an audience inundated with promotions for the latest, greatest, gotta-have, must-see credit card offerings.

So what's the latest buzz in this high-profile industry? Here's a roundup of some credit card trends.

Credit union cards
charge an average
APR (annual
percentage rate)
three and a half
percentage points lower
than bank credit cards.
Offers they can refuse
According to the 1998 Statistical Abstract of the United States, credit card spending will hit almost $900 billion next year. No wonder the 7,000 card issuers out there are deluging consumers with applications. The battle for consumers' wallets is also a battle for survival in the marketplace.

David Conti and his wife, Eileen Guerin, of Melrose, Mass., have received 170 credit card offers in the past two years. MBNA sent the most offers—for seven different cards—but the Arbor Day Foundation sent the couple four identical offers for the same card. All told, they've been extended a credit line of $3 million, in increments ranging from $1,000 to $100,000.

Heavy metal
To lure such credit-worthy customers as Conti and Guerin to their folds, card issuers have started handing out gold like they're at the Olympics. As gold and platinum cards have become ubiquitous in the market, they've lost some of their luster.

Other cards have switched tactics by replacing a teaser rate with a lower long-term interest rate. It turns out that teaser rates attract the equivalent of transients in the credit card industry. As soon as the teaser rate expires, many consumers move on—before the card issuer makes any money off of them.

Still other cards go for the gimmick. Among the odd offerings: the Chase Lens Card, which includes a built-in magnifying glass.

Credit card
spending will hit
almost $900 billion
in 2000.
A leaner and meaner industry
With card issuers paying $80 to $100 to land each customer, the price of entry to the credit card game has become too rich for some companies. So big players like Citibank, First USA, and Chase Manhattan are becoming even larger by buying out their competitors. Thirty-two million credit card accounts switched hands in 1998, much to the surprise of many cardholders.

"Once the acquisition takes place and a few months go by, there may be an insert in your bill telling you about the switch and changes in rates," says Deborah McNaughton, author of All About Credit: Questions and Answers About the Most Common Credit Problems (ISBN 0793131537). "Most people don't read those inserts, so they don't notice until the changes have already taken place."

My Visa card is cooler than yours
If people don't like the changes and decide to switch cards, it's likely they'll choose a cobranded or affinity credit card. Visa USA predicts that these popular cards will account for 50% of all bank cards by 2000.

For every cause, hobby, sports team, and university, there is a credit card to match. Garfield touts his own MasterCard. Trekkers can explore the final frontier of credit with their own Star Trek credit card. Harley devotees can rev up their wallets with a Harley Davidson credit card. And countless school alumni carry a card with a picture of their alma maters.

However, some cobranded cards offer no incentives and come with less-than-desirable interest rates and fees. In other words, they're often nothing more than a pretty face.
    Banks' income from
    credit card fees
    grew 79% over
    the past two years,
    while interest income
    rose only 10%.

Gold and platinum
cards have lost
their luster.
Fee for all
Look up in the sky! It's not a bird, a plane, or Superman. It's rising credit card fees! According to a study by the Consumer Federation of America and Consumer Action of San Francisco, the average late fee increased from $12.53 in 1995 to $21.82 in 1998. The most exorbitant late fees now top out at $35. "This is not chump change," says Linda Sherry, spokesperson for Consumer Action.

As consumers shop around on interest rates, card issuers increasingly have relied on fees as their moneymaker. According to RAM Research Corp. of Gettysburg, Penn., banks' income from credit card fees grew 79% over the past two years, while interest income rose only 10%.

However, that hasn't stopped card issuers from adding insult to injury by charging a penalty interest rate on top of a late fee. A relatively new cash cow, the penalty rate hikes a card's interest rate—permanently—above 20% once a cardholder has missed a payment due date.

A Consumer Action survey of 35 bank cards found that penalty rates ranged from 16.25% to 24.95%, an average of 4.5 percentage points higher than their regular rates. Many banks also have shortened grace periods, leaving cardholders with an even narrower window of opportunity for mailing in payments on time.

To their credit
Take heart. Credit union members have access to cards with more attractive terms than their bank counterparts. Credit union cards charge an average APR (annual percentage rate) three and a half percentage points lower than bank credit cards.

And credit union cardholders have a much better track record than bank customers when it comes to paying their card bills. According to Veribanc, a bank rating and research firm in Wakefield, Mass., only 1.56% of credit union credit card accounts are outstanding after two months. Banks, which measure delinquency after three months, average 2.12%.

What's more, the average balance on delinquent credit union card accounts is only $2,500. And credit union accounts six months overdue have a "cure" rate of 75%. "Credit unions seem to be able to better work with their customers [members]," says Warren Heller, Veribanc's research director.

Rest assured, credit unions' dedication to their members is one thing that will never go out of style.

©1999 Credit Union National Association Inc.