What's the rate on that card?
You won't know until it arrives
By Lucy Lazarony • Bankrate.com

Would you be willing to buy a shirt with a price tag that read "$20 to $80"? Or how about a stereo marked "$50 to $400 -- we'll tell you later." Would you be willing to purchase any product when the exact price won't be unveiled until after you've committed to buy?

Yet that's precisely the dilemma consumers face when they shop for credit cards on the Web.

Some credit card issuers have started listing a range of annual percentage rates on card offers. The exact rate is decided after a customer opens an account.

The illusion of a better rate
"It's a direct attack on the idea of disclosure and price competitiveness," says Howard Strong, attorney and author of What Every Credit Card User Needs to Know.

"Why would you apply for a card when they won't tell you what it's going to cost you? It's some fantasy that you're going to get a better rate. You're not. It's a marketing ploy."

Check out these examples.

• A Washington Mutual platinum Visa issued by Associates National Bank lists its APR as 13.99 percent, 16.99 percent, 19.99 percent or 25.99 percent.
• Key Bank offers classic, gold and platinum Visas and MasterCards with APRs ranging from 10.99 percent to 25.99 percent.
• Standard and platinum MasterCards from Wells Fargo list rates of 13.5 percent for people with "premium credit," 16.9 percent for people with "preferred proven credit" and 18.9 percent for people with "proven credit." But you won't know which you are until you get the card
• At Bank of America, standard, gold and platinum Visa and MasterCard offers come with APRs ranging from 9.9 percent to 22.4 percent. "The type of account, APR and credit line will be based on our review of your current credit report and information you provide on the application," an offer explains.

Calling an 800 number for more information won't help. You won't learn the true price of a credit card -- its APR -- until one arrives with your name on it.

"With credit cards, you can't get the rate until you get the card," says Ken McEldowney, executive director of Consumer Action, a consumer advocacy organization in San Francisco.

"It's much harder to shop around. There's much more potential damage to your credit score."

Credit checks can hurt credit
When you apply for a credit card, you give a lender permission to pull a copy of your credit report. Each time a lender peeks at your credit history an inquiry appears on your report. Frequent inquiries can be a sign of iffy credit.

"The more inquiries on a borrower's credit file, the more likely a borrower may be not to pay his or her bills as agreed," explains Fair, Isaac and Co., the nation's leading credit scoring firm, on its Web site.

Every credit card application is counted as an inquiry. Experts say inquiries account for less than 5 percent of a credit score. How you pay your bills and how much you owe are much bigger factors, making up about two-thirds of a credit score.

Still, every little bit counts. A consumer could scuff up a credit score by applying for lots of cards. And it's easy to see how that could happen when issuers won't reveal interest rates until after you apply.

"It's especially unfortunate that this is happening on the Web," says Gail K. Hillebrand, a senior attorney at Consumers Union in San Francisco. "The Web gives you the ability to shop rates."

Bankrate.com helps you compare offers quickly with our credit card search engine and rate tables.

A range of rates
Getting detailed cost information from individual card sites can be tricky. Issuers that offer a range of rates on a single card offer are only part of the problem. Other online card sites make you apply for several cards at the same time. It's tough to pin down costs when you're being considered for cards with interest rates ranging from 9.9 percent to 24 percent.

"It's really an attempt to more closely match the offer with the creditworthiness of the applicant," says Frank Martien, a senior consultant at First Annapolis Consulting in Linthicum, Md. "Not disclosing rates up front probably enabled those issuers to approve a broader range of applications."

Issuers, keen to embrace the Internet and to snag the business of Web-savvy consumers, started posting online applications on their Web sites a couple of years ago. It didn't go well.

"They were just getting eaten alive with low response rates and adverse selection," Martien says.

In other words, most of the people applying for a card with say, a 12 percent APR, were the last people issuers would approve.

More choices, less information
So issuers now are trying a something-for-everybody approach. They're offering more credit choices and giving out less specific pricing information on their Web sites.

There's a good chance you will be approved for something. How good a deal will it be? How it will compare to other offers on the Web or in your mailbox? You won't know until you apply.

"Consumers who want certainty should consider cards with one rate that's charged to every customer," says Stephen Brobeck, executive director of the Consumer Federation of America.

Plenty of issuers still offer single rate card deals, so it is possible to shop for a card online and avoid sites with sketchy price disclosures.

"The important thing is to comparison shop," Brobeck says. "If you can find a rate under 13 percent, it's a good deal."

Surf all you want on the Web but try to keep your credit applications to a minimum. There's no point mussing up the credit score. Once you get a card, avoid racking up big balances.

"The most important advice for consumers is to pay off the card in full every month so then you don't have to worry about rates and fees," Brobeck says.

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e-mail bankrate editors.

-- Posted: Aug. 30, 2000