Arkansas banks and credit unions have a history of offering some of the best credit card interest rates in the country.
As far back as the early 1990s, at least three Arkansas institutions had the lowest credit card rates in the nation -- Simmons, First National Bank of Fayetteville and Arkansas Federal Savings Bank of Little Rock. All had cards with rates of 9.5 percent interest.
Rates have remained fairly consistent, and low, in Arkansas, said Greg McBride, chief financial analyst with Bankrate.com, an online publisher of financial rates.
The low Arkansas credit card interest rates "are not a temporary phenomenon or a flash in the pan by any means," McBride said.
Many credit cards offer a zero percent interest rate for a period of months -- at times as long as 18 to 21 months -- for balance transfers and purchases, McBride said.
But rates often jump to 15 percent or higher when those introductory rates expire, said Dewanna Rogers, vice president of credit card services at Simmons First National Bank in Pine Bluff.
"So the [zero percent card issuers] can justify some of that lost revenue because they are going to charge you a higher rate on the back end," Rogers said. "Plus they have penalty rates where they will throw you into [a higher rate] if you default for one month."
Rates were low at the time because Arkansas' usury law didn't allow loans that were more than 5 percent above the federal discount rate. Credit card interest rates remained low for some Arkansas banks, despite a change in the law in 1999.
"I think the Arkansas credit card history, particularly when it comes to rates, is something all Arkansans can take pride in," said Curtis Arnold of Little Rock, founder of CardRatings.com and author of You Can Profit from Credit Cards. Arnold sold CardRatings.com to online marketer Quinstreet Inc. of Foster City, Calif., in 2008.
When the usury law limit ended in Arkansas, people expected low interest rate credit cards would disappear, Arnold said.
"But obviously, many years later, it has not, so the legacy continues," Arnold said. "The bottom line is that consumers can save a lot of money [with low rate cards]."
Simmons offers one of the lowest credit card rates in the country at 7.25 percent. The bank began offering credit cards in 1967 and has offered low-interest rate cards since the 1980s, when national interest rates were in the teens and Arkansas had the usury cap law, said Larry Bates, executive vice president for specialty lending at Simmons.
The 7.25 percent interest rate card, available nationally, is one of the lowest rate cards in the country now. It is a variable rate tied to the Federal Reserve's prime rate, which hasn't changed in several years.
Simmons, which is publicly traded, made $22.9 million from credit card and debit card fees last year, up 28 percent from $17.8 million in 2013. Credit card expenses were $8.7 million last year, up from $6.9 million in 2013.
The bank's credit card portfolio was $185.4 million last year, up slightly from $184.9 million in 2013.
"Our credit card portfolio has remained a stable source of lending for several years," Simmons said in its 2014 annual report.
Simmons charged off 1.27 percent of its total credit card loans last year, down slightly from 1.33 percent in 2013.
"Our strategy has always been to offer one of the lowest, if not the lowest, credit card rates in the country and offer the card to creditworthy customers to minimize credit loss," Bates said.
Simmons keeps its losses low on the credit card by tight underwriting before issuing the card, Bates said.
The bank has attracted customers nationally, in part, from advertising in publications such as Money magazine, The Wall Street Journal, Kiplinger's and Bottom Line.
Simmons' acquisitions in Missouri, Kansas and Tennessee have given it the opportunity to market the credit cards in "some very strong growth markets and to a highly desirable customer base," Bates said.
Other Arkansas cards, not as widely distributed, have even lower rates.
TruService Community Federal Credit Union of Little Rock offers a card at 5.25 percent interest.
"That's the lowest credit card rate I've seen in I don't know when," said Shane Tripcony, who cofounded BestPrepaidDebitCards.com with Arnold in 2013. The site provides information about secured debit cards.
TruService has offered the rate for about three years, said Linda Jeffery, chief executive officer for what is the oldest credit union in the state, founded in 1930. The rate is variable at 2 percent above the prime rate, Jeffery said.
The card is available only to members of TruService, which includes residents in Pulaski and Faulkner counties.
"We've researched it and it's one of the lowest rates [available]," Jeffery said. TruService has offered a credit card to its members for 23 years and has offered a low rate for the past 10 years, she said.
Like Simmons, TruService has strict underwriting guidelines based in part on a customer's credit rating.
"We've had a good response," Jeffery said.
Arkansas Federal Credit Union of Jacksonville offers a credit card with a 6 percent interest rate, said Ross Talbert, vice president of payment solutions.
"This is for folks who, from time to time, carry balances on their card," Talbert said. "This gives them a lower than industry standard rate. More of their payment goes to the principal."
Arkansas Federal has offered a low rate credit card since it began offering cards in the 1990s, said Rodney Showmar, Arkansas Federal's chief executive officer.
Arkansas Federal offers credit cards to its members. Primarily, to become a member the consumer must work for or be retired from one of the more than 650 employers affiliated with the credit union, including the state of Arkansas and the military, Showmar said.
Arvest Bank of Fayetteville offers a card with a rate of 10.9 percent, said Lorrie Madden, president of Arvest's security bank card.
Arvest offers its cards in its four-state trade area of Arkansas, Oklahoma, Kansas and Missouri, Madden said.
"We don't venture out across the whole country unless there is a banking relationship with that customer," Madden said.
Many financial institutions also are offering secured cards that allow customers to establish or repair credit or use prepaid debit cards.
With a secured card, the customer puts cash down as collateral to qualify for the card.
"That reduces the risk to the institution," Arkansas Federal's Talbert said. "That means that virtually anybody can get that card. It really is for people that have no credit history or have had a hiccup in the past."
Transactions are reported to the credit bureau, Showmar said.
"That shows they have a credit card and have paid it off, so it helps build their credit," Showmar said.
Prepaid debit cards are funded by debit accounts.
"By being considered a debit card instead of a credit card, purchases simply draw down the amount deposited in the account," Tripcony said. "When the account reaches zero, there is no more ability to purchase until the cardholder deposits more money."
Since it is a debit card, nothing is reported to the credit bureau, Tripcony said. And unlike a checking account, a prepaid debit card cannot be overdrawn so it cannot generate fees for insufficient funds, Tripcony said.
"Prepaid cards are a rapidly growing market," Arnold said. "We use it for our son's allowance. And you can use it as a budget tool."
SundayMonday Business on 06/28/2015