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Interest rates have dropped, but your credit-card issuer must not have heard the news. Bank card interest rates remain stubbornly in the 18.5 percent range, even though card issuers' cost of funds - the rate they pay you on your deposits - has fallen, according to Changing Times, the Kiplinger magazine.

Citibank, for one, charges 19.8 percent on credit-card debts but pays out only about 5 percent on money-market deposit accounts.To add insult to injury, some card issuers whose variable rates would have fallen in April, when quarterly adjustments took effect, changed their formulas to keep rates high.

American Express Optima cardholders now pay prime plus 6.75 percentage points (16.25 percent) instead of prime plus 5.75 points. Bank of New York's cardholders pay prime plus 8.9 points (17.75 percent, instead of 16.9 percent). Card issuers may change fixed-interest rates or variable-rate formulas with 15 days' notice.

Bankers say credit-card rates remain high because the rising cost to them of personal bankruptcies more than offsets the benefit of cheaper money. In an effort to stem bankruptcy losses, many banks are upgrading their credit-card portfolios by weeding out bad risks and encouraging good risks to join or stay on as cardholders.

First Chicago reviewed the credit reports of cardholders in nine states and canceled cards of some whose reports showed delinquent payments to other creditors. First Atlanta, a Delaware subsidiary of First Wachovia, has also canceled cards before they expired. Other banks commonly review your credit history before renewing a card.

In view of tighter standards, now is a good time to check your credit report for errors.

But good credit risks may be among the first to benefit from pressure on banks to drop annual fees. The popularity of AT&T's Universal card (and a no-fee Visa card expected to be offered by Sears) have forced some banks to consider ditching their annual levies. Chase Manhattan, for example, is test-marketing a no-fee credit card. You can get one only if Chase solicits you.

Robert B. McKinley, editor of RAM Research's Bankcard Update, says 400 banks offer some kind of waiver or reduction in the annual fee - up from 300 last year. Most breaks go to cardholders with accounts at the same bank.