For service, small banks run circles
around the big credit card issuers
By Lucy Lazarony • Bankrate.com

Don't forget about the little guys.

That community bank around the corner may have the low-rate, low-fee credit card you're looking for and boast a kind of customer service that's all but disappeared in the "account number, please" era of the big bank.

"A small bank is going to know who you are, as opposed to a megabank that's only going to know you as an account number. We know most of our customers' names and faces," says Gina McCoy, director of marketing at Tri-Parish Bank in Eunice, a city of 12,000 in south-central Louisiana. "If they don't understand something, they know they can just call us or come by."

Small issuers such as Tri-Parish, with $86 million in assets, know they can't match the sophisticated card programs and rock-bottom rates offered by the nation's largest issuers, which have hundreds of billions in assets. Instead, the little guys tend to support local causes -- and give extra care to their customers.

Call the banker at home
At Tri-Parish, for example, card customers are free to call bank employees at home. McCoy has even been stopped at the grocery store.

"Most of us are listed in the book so they'll call us at home and figure it out from there," she says. "They'll stop us at the grocery store. They'll pull out their statements between the milk and the dairy products."

Like many smaller financial institutions, Tri-Parish thinks nothing of helping a longtime customer out of a financial pinch -- even one who underestimates the cost of a big European holiday.

"We've had people call us from Europe and say, 'I'm over here and I've decided to stay another two weeks and I need more money.' So we call in and give an instant bump to them," McCoy says.

Similar "emergency" calls also have been made from the local mall.

They'll cut you a break
Because smaller banks pride themselves on their relationships, they often reward customers with multiple accounts carrying lower credit card rates and fees. They also may be more willing to give patrons with less-than-perfect credit records a good deal on a card.

"You might get your best deal where you have your checking account," says Frank Martien, a senior associate at First Annapolis Consulting based in Linthicum, Md. "That's where I would go if I had bad credit."

While some smaller banks offer rebate credit cards and air mile card programs to rival the big boys, lots of community banks stick to the basics. Tri-Parish offers a Visa Classic and a standard MasterCard with a rate of 12.9 percent. There is an annual fee of $12, which drops to $6 for senior citizens. Most of the fees are waived for people with other accounts at the bank.

The credit card deals at Artisans Bank in Wilmington, Del., are also very much "what you see is what you get." The bank refuses to tease customers with low introductory rates. Interest rates are 12.9 percent on standard cards and 11.9 percent on gold cards.

"We just basically say, 'This is the rate and this is how it's going to be,' " says Jim Metcalfe, vice president of marketing. "It's kind of plain vanilla.

"It's not the kind of thing, 'Here's the introductory rate, if you're late or miss a payment you get pushed up to 20 percent.' "

Fees are a last resort
Many issuers are following the lead of large, national issuers, such as Artisans' cross-town rival First USA, and doing just that. Late fees and over-the-limit fees and penalty rates are on the rise. On many cards all it takes is one infraction and a customer gets slammed with a $29 fee and a stiff penalty rate. Late fees are levied if a payment arrives just one day late.

"Large issuers are starting to zap those fees really quickly and people are getting disgusted," say Scott Broughton, vice president of marketing for Independent Community Bankers of America Bancard, the payment services subsidiary of the ICBA. "I don't think a community bank would do that. They don't typically 'fee' their customers to death. I think they're a lot more careful."

Penalty fees at community banks run about $10 or $15. Some fees are as little as $5, experts say. Smaller banks also tend to give customers more leeway with payment deadlines. Many accept payments within 10 days of the due date without imposing fees.

Such is the policy at Park Bank in Madison, Wis., which caps its late fees and over-the-limit fees at $10. But as BankCard manager Teri Henning points out, even those fees are negotiable.

"Everyone makes a mistake here and there," Henning says. "We refund a lot of them ... It's too hard to get good customers to be picky about $10."

Enjoy longer grace periods
Card customers at a smaller bank are also apt to enjoy a long grace period, often 25 days or more on their cards.

A grace period is the short period after a purchase is made when interest is not charged. Most cards offer a grace period right after a purchase is made on a card with a zero balance.

Many issuers have whittled grace periods on their cards down 20 days. This means customers have less time to pay off balances and more time to be slapped with interest whenever they don't pay in full.

Another advantage of having a credit card at a local bank is the ease of making payments. You need not worry about whether a payment is going to make it to a faraway processing center. You can pay your bill at a local branch.

"MBNA is five minutes from where I live and yet I can't walk into their building and pay my credit card bill," Metcalfe says. "I can walk into any Artisans branch and pay my bill and it's paid from that moment on."

Local causes gain support
Community banks also offer cards that are tied to local organizations and colleges. Some raise money for student scholarships. Others, such as County Bank in Merced, Calif., spotlight a local landmark. The bank's standard Visas and MasterCards feature a picture of the historic 124-year-old Merced County Courthouse.

Park Bank has been offering H.O.P.E. Visa cards since November 1995. The bank donates 25 cents to local charities each time a cardholder makes a purchase with the card. H.O.P.E. stands for Healing, Offering, Preserving and Enriching. Its Ecology Card is tied to organizations such as the Humane Society and the Timber Wolf Alliance of Wisconsin. The H.O.P.E. Health Card helps groups such as the Alzheimer's Association and a local hospital's "littlest angel" program, which raises money for babies with special needs.

H.O.P.E. cards come with a 7.9 percent, six-month introductory rate and fixed annual percentage rate of 14.52 percent. The cards are also available with a variable rate.

"They're getting a good financial deal and at the same time they're helping some local organizations," says Park Bank's Henning. "You can't really lose."

-- Posted: June 28, 1999