Wachovia Corp. has cut the interest rate on some credit cards to 8.9% - the lowest offered by a national card issuer.
Wednesday's half-point reduction stemmed directly from the cut in its prime lending rate two weeks ago. Wachovia prices its "Prime Plus" Visa and MasterCard at 2.9 percentage points over the prime and adjusts the rate on the 15th of each month.
The North Carolina-based company introduced its Prime Plus card early last year, when rumblings of a rate war first rippled through the industry.
Rate Cutting Widens
While other issuers had long offered cards to local consumers at bargain-basement prices, Wachovia was one of the first to make cheaper cards available nationwide.
Its latest move came amid widespread rate cutting. Also on Wednesday, for instance, Mellon Bank Corp. in Pittsburgh introduced a variable-rate card with a 13.9% rate and a $35 annual fee. The banking company, which has $1 billion in card loans, will set the card's rate at the prime plus 6.9 points but no lower than 13.9%.
Mellon also offers a fixed-rate card, whose holders pay 18.6%, plus an $18 annual fee.
Also this month, Minneapolis-based Norwest Corp. - which links its card rates to the prime and adjusts them quarterly - reduced its rate on regular MasterCard and Visa cards by a half point, to 15%.
Stagnant Rates Criticized
Valley National Bank, Phoenix, and Huntington Banks of Michigan also announced reduced rates in recent days.
The industry came under fire last year because credit card rates were not falling despite large reductions in overall rates. Since then, however, rates have started to fall.
"The last couple of rate cuts by banks did not make much of a splash in the media," said Robert Mckinley, the Frederick, Md.-based publisher of CardTrak. But he said at least 462 MasterCard and Visa issuers offer rates below 15%.
The average card rate now stands at 18.22%, compared to 18.96% one year ago, according to Mr. McKinley. His firm surveys more than 500 issuers, representing more than 93% of the industry, and weights the results according to market share.
Unweighted, the average rate is now 17.41%, down from 18.42% in July 1991. "It's really unprecedented in the industry for rates to move down that fast," Mr. McKinley said.
Wachovia charges holders of its Prime Plus card a hefty $39 annual fee. It also offers a prime-based card with no annual fee at a current interest rate 15.9%
The company, which issues credit cards out of a Wilmington, Del.-based subsidiary, will not disclose how many consumers have bought the Prime Plus product. Overall, it has two million cardholders and credit card loans outstanding of $2 billion, ranking it 21st among issuers.
Mr. McKinley said that Wachovia also issues affinity cards for the Charles J. Givens Organization - a financial planning service - with an interest rate of prime plus 1.75%. The card is available to applicants nationwide, he said.
A Wachovia spokeswoman said the bank does not discuss its affinity marketing arrangements.