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Group Says Offers for Low-Cost Bank Cards Deceptive

November 20, 1986

WASHINGTON (AP) _ Direct mail and other offers of low-cost bank cards mislead millions of Americans by masking high interest rates, hidden fees and other costs, a consumer group charged Thursday.

The organization, Bankcard Holders of America, urged consumers to look closely at the fine print in solicitations for Visa or other similar bank credit cards.

″The banks have been filling American mailboxes with false claims and phony offers,″ said Elgie Holstein, Bankcard Holders’ director.

The group, a non-profit organization which favors legislation limiting credit card interest rates, said banks often engage in deceptive advertising to lure consumers into the lucrative world of revolving credit.

Seventy-two million Americans carry 161 million bank cards, representing about $80 billion in debt, Holstein said. Most consumers have no idea that an enticing offer for a cheap card hides other costs, he said.

Annual fees, interest rates and other financial terms are contained in the fine print, if they appear at all on the offer, Holstein said. Sometimes the customer must write away for financial details, or receives them only when the card arrives.

Holstein praised some low-interest cards, such as a program by the AFL-CIO which offers union members a MasterCard through the Bank of New York at 12.5 percent, which is below market interest rates.

But he criticized many others, singling out one card, First Select Visa, offered by the First Deposit National Bank of Tilton, N.H., as one of the ″most egregious″ examples of what to watch out for.

The card, which has no annual fee, promises low monthly payments and an immediate $1,000 cash advance. But Holstein said card customers are given no choice about whether to take the $1,000 advance and can be charged interest on the money. The annual interest rate is 21.9 percent, one of the highest in the nation and well above the national average of 18.6 percent, he said.

Minimum monthly payments are only about 2 percent of the outstanding balance, compared with other card companies which usually have monthly minimum payments of about 4 percent. More interest is ultimately paid since it takes longer to pay off the balance, Holstein said.

Jean Peters, manager of corporate public relations for Capital Holding Corp., First Deposit’s parent firm, said the card is sent to people ″whose credit histories show that they like the convenience of being able to use credit more heavily.″

″The feature that is being emphasized here is that they can make a lower payment with their card for the same sized purchase than they could with some other card perhaps,″ she said from the firm’s headquarters in Louisville, Ky.

She said the company also offered a 1 percent rebate on all purchases charged on the card, which ″has the effect of reducing the total cost of the card to consumer.″

Holstein urged consumers to press for legislation imposing limits on interest and regulating financial disclosure for bank card companies.

Only four states - Texas, Arkansas, Washington and Connecticut - limit annual interest rates for credit cards to 15 percent or less, Holstein said.

Legislation that would have required credit-card companies to disclose fees and other costs in advertisements died this year in Congress.

Bankcard Holders unveiled an information pamphlet on credit cards which consumers may obtain by sending $1 to the organization at 333 Pennsylvania Ave. SE, Washington D.C. 20003.

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