By TERESA TRITCH Reporter associate: Julie Goss

(MONEY Magazine) – There's an unintended message in all those perfervid ads and letters streaming your way lately, urging you to sign up for the credit card of your dreams. Rejoice! For the first time in their lavishly profitable history, the major card issuers may need you more than you need them. At last, the major banks (listed in the top half of the table on page 128) that dominate the world of plastic are feeling the winds of competition blowing against their near-20% interest rates and $20 annual fees. The intruders include AT&T's no-fee Universal Visa and MasterCard, Sears' no-fee Discover and just-launched no-fee Prime Option Visa, American Express' medium- rate (16.75%) Optima, and Japan Credit Bureau's American Express-like JCB charge card. All are pushing into a saturated market at a time when many banks, hobbled by soured real estate loans, are counting on their lucrative credit-card line of business more than ever. So plastic will finally be getting cheaper, right? The answer is yes, if you make it happen yourself. ''Cardholders will increasingly refuse to pay annual fees,'' says David Robertson, president of Consumer Credit Card Rating Service in Santa Monica, Calif. ''But they haven't yet shown the same sensitivity to high interest rates, which is how credit-card costs really mount.'' Moreover, even as competition heats up, significant savings are threatened by a countervailing trend: consolidation. Large banks are devouring smaller, usually less expensive issuers -- the 10 largest bank-card issuers now hold 53% of all plastic debt, up from 47% in 1988. As a result, the supply of low- rate, low-fee cards dwindles, while bargain issuers who do survive must bump up rates and fees to cover the costs of duking it out for customers with the big banks. Longtime bargain issuer People's Bank in Connecticut, for example, recently raised its interest rate from 13.5% to 13.9%. (At nearly six percentage points below the rate charged by most major issuers, however, the card is still a great deal.) Clearly, then, you can't just sit by idly and wait for rates and fees to vanish. Instead, here are six strategies you can use right now that could shave as much as 8.8 percentage points off your credit-card interest and eliminate annual fees altogether: Shop for the lowest interest rate you can find. Customers lured by deals on annual fees are missing the crucial point for the two-thirds of cardholders who maintain a credit-card balance: you'll nearly always save more during the year by choosing a low-rate card, even one with an annual fee, over a high- rate card with no fee. (Most holders actually opt for the worst combination -- high rates and high fees -- as a glance at the major issuers in the table on page 128 illustrates.) On a $1,200 average balance, your annual interest cost on a major bank card charging 19.8% comes to $237.60. (Chances are you'll pay an $18 to $20 annual fee too.) By comparison, the yearly interest for the same balance on a People's Bank Visa or MasterCard charging 13.9% would be just $166.80. Even when you add in People's annual fee of $25, you still come out ahead with the lower rate. You can obtain lists of nationally available lower-rate (as low as 11%) Visa and MasterCards by writing to Bankcard Holders of America (560 Herndon Pkwy., Herndon, Va. 22070; $1.50) or Ram Research's Cardtrak (Box 1700, Frederick, Md. 21702; $5). Lists of no-annual-fee cards are also available. Look for undesirable trade-offs before you leap, however. At 11% recently, the lowest- rate bank card in the country -- from Arkansas Federal Savings -- generally applies strict credit standards and then holds its new cardholders to a $1,000 to $2,000 credit limit. You might also shop among your current connections. Many credit unions offer cards with fixed rates averaging around 15.2%, and some of the 2,600 alumni, fraternal and professional groups like the American Association of Retired Persons and the National Education Association issue cards that beat the behemoths by four points or more. Don't pay annual fees. The one-third of cardholders who do pay off their balances each month needn't be concerned about interest rates, since they don't pay interest. So to maximize savings, choose a no-fee card with a grace period. (The bank still makes money through so-called interchange fees -- charges that merchants pay to the issuer when they accept your plastic, generally 2% of your total purchase amounts.) Competition has added a profitable twist for those who regularly use a card, make timely payments and carry a balance. If you are among this number, call your card issuer when the annual fee bill arrives and ask to have the charge waived. Although most major issuers deny that they do so, industry insiders tell another story. Says one consultant, who asked not to be identified: ''Most issuers are waiving fees when customers call to cancel, in order to save the account.'' His advice: ''It's definitely worth trying.'' Some banks, such as Harris Trust & Savings Bank in Chicago, have adopted a compromise approach: the $20 annual fee for a nationally available Visa or MasterCard is automatically waived for the first two calendar years. After that, there's no fee if you pay at least $25 in annual interest. If you use your card frequently but pay up every month, you might try to get the annual fee deep-sixed by arguing that your card usage generates significant interchange fees. Kurt Peters, editor of Credit Card News, an industry newsletter, points out that while you may not be considered an ideal customer, you may still be a cash cow worth milking if you charge more than $3,500 a year. If the bank won't waive your fee, resist the urge to cancel a card you use until you have a replacement in hand. Time purchases and payments carefully. Under nearly all credit-card agreements, an interest-free grace period -- typically 25 days between the billing date and the due date -- applies only if you pay your balance in full; if you don't, most issuers will assess interest on new-purchase amounts almost immediately. If you pay in full each month, you can get the most from the grace period by making big credit purchases just after your statement closing date and paying your bill, on time, of course, but at the last minute. By so doing, you'll get interest-free use of the credit-card loan for some 50 days, a float that on, say, $3,000 in a money-market fund yielding 6.5% would let you earn an additional $27.

If you maintain a credit balance, adopt the reverse tactic: buy big-ticket items toward the end of the billing cycle and, more importantly, pay as much of the bill as possible each month as soon as you get your bill. This slows the interest-rate meter and lowers your cost. Some issuers, such as Bank of New York (Delaware), offer a low interest rate but no grace period (see the lower half of the table). That's still a good deal if you keep a balance running each month. If you never carry a balance or do so only occasionally, however, go for a low-rate card with a grace period. Monitor who owns your card. If your account is sold to another issuer (a fate that has befallen nearly one in 10 cardholders since 1989 as banks sell assets to raise cash), chances are your terms will change too -- for the worse. Buyers tend to be the major issuers, specializing in above-average rates and fees. Your best defense is to shop for a new card as soon as you're notified of the sale. That way, you'll be sure that you won't be blindsided by a sudden fee or rate increase or, worse yet, cancellation if the new owner takes an unfavorable view of your credit record. Carry no more than three cards.Robert McKinley, publisher of Ram Research's Bankcard Update newsletter, recommends one no-annual-fee card with a grace period for purchases you plan to pay off in full each month, and a low- interest-rate card for purchases you want to finance, ideally also without an annual fee. Keep a third low-rate card for business use only. If you're a sole proprietor, you're allowed to take a tax deduction for the interest you pay on financed business expenses; a business-use-only card will help you keep tax records in order and substantiate the expenditures if you're ever audited. For salaried employees, an American Express corporate card -- if your employer provides one -- fills the third-card niche. Otherwise, stick with two. Even if your superfluous cards are fee-free and you're never tempted to charge a cent, banks and other lenders may count the total credit available to you as if you'd already spent it, thus sometimes disqualifying you for other borrowing, such as a car loan or even a mortgage. So notify your banks in writing that you want your unused cards canceled. Follow up with a note to the credit bureaus regarding your action; your credit-card issuer can tell you which bureaus to inform. Resist the come-ons. If you're paying upwards of $18 for a standard card or $35 for a gold card because you're enamored of the enhancements, ask yourself if you're ever likely to use them. Indeed, some of the most popular perks, such as buyer protection and rental-car insurance, apply only after your own homeowners, renters or auto insurance pays off. If you truly believe you'll use an enhancement someday, find out just how it would kick in should you make a claim. Recently both American Express and Visa quietly restricted their buyer-protection coverage to $1,000 per-claim -- previously there had been no per-claim limit -- and excluded from protection anything stolen from a car. MasterCard considered establishing a deductible before you could collect on a claim but has shelved the idea, at least through this year. Also bear in mind that many issuers now offer enhancements on lower-cost standard cards and even on some thrifty cards, such as Abbott Bank's Visa or MasterCard. And if you're creditworthy, you can get your credit limit raised as high on a standard card as on a gold. How? Just ask.

CHART: NOT AVAILABLE CREDIT: SOURCES: Bank Rate Monitor, Bankcard Holders of America, Applied Card Systems CAPTION: A SHOPPER'S GUIDE TO THE 10 BEST CREDIT CARDS Most credit-card holders carry one or more cards of the 10 largest issuers listed below. Trouble is, they're generally the most expensive ones to use. So if you want to shop around for better deals, start with the lower half of the table, where you'll find the 10 least costly nationally available competitors. In general, the five no-fee alternatives will give you rock-bottom costs if you pay your card off each month; look to the five with annual fees if you tend to carry a balance month to month. All 20 issuers are listed from least to most costly in their respective categories, based on what you would pay annually if you kept an average balance of $1,200. Why the cost gap? The big issuers' cards are often loaded with enhancements and service extras you pay for whether you use them or not. The majors also charge more to cover their greater risk of default.