GE issues MasterCard with rebates Analysts call move a risky venture

September 03, 1992|By Ian Johnson | Ian Johnson,New York Bureau

NEW YORK -- In a risky move to capture a greater share of the saturated credit-card market, General Electric Capital started issuing a new MasterCard yesterday that gives consumers a novel array of rebates, rewards and coupons.

Called "GE Rewards," the card works like a regular MasterCard but gives members a $10 check for every $500 of purchases. The checks can be redeemed at 24 participating stores, entertainment services and travel businesses. Each of these companies also plans to give cardholders $10 coupons each quarter and a variety of other rebates.

"Consumers are changing away from the conspicuous consumption of the '80s to prudent purchasing of the '90s," said Gary Wendt, chairman and chief executive of GE Capital, a financing subsidiary of General Electric Co. "This card reflects this trend."

According to Mr. Wendt, an average consumer who took advantage of all the coupons and rebates could save $1,000 a year. Presumably, this would mean using many of the $10 quarterly coupons and racking up several thousand dollars in charges to qualify for the $10 checks. GE officials could not specify how they arrived at the $1,000 figure.

Industry analysts were not as optimistic about the success of the new card or that consumers would save much from the rebate program.

More than 100 million Americans already hold Visa, MasterCard, Discover or Optima credit cards. In all, more than 1 billion cards are circulating in the United States, about 10 per household.

GE has issued credit cards since 1987 through Monogram Bank. It now has 5.3 million Visa and MasterCard customers and has acquired a $2 billion portfolio.

The new venture, however, is the first time it has taken the risk of starting a new product. Officials declined to divulge their target figures for new members or how much they will spend on direct mail and television advertising, which is to start this month. A toll-free number has been set up to accept applications.

"They will have to stand on their heads to get noticed," said Robert B. McKinley, head of RAM Research Corp., a credit card analyst in Frederick. "For GE to come in at a time like this is very, very difficult."

In addition, Mr. McKinley said, consumers might find the rebate and check system too complicated to bother with. The $25 annual fee and basic 18.4 percent interest rate are also not competitive with many other cards, he said. The 71 percent of Americans who run up monthly debts would pay for the bonuses through higher interest charges.

A special 14.9 percent rate is available for members with good credit ratings.

"Consumers have been bombarded by these kind of incentives, and our research shows that they are not the determining factors," Mr. McKinley said. "People want their cards to be accepted and for the interest rates to be low."

Interest rates on some other cards run 4 percent lower. Other card issuers also offer incentives, such as a cash rebate from Discover and discounts on some Visa cards for ordering products by mail.

The GE Rewards card incentives would be valid only at participating companies, which include Kmart, Macy's, Toys 'R' Us, Foot Locker, Waldenbooks, Hyatt Hotels & Resorts, Northwest Airlines, Hertz, Home Box Office and Sprint.

The $10 checks must be spent at these stores but can be used on any goods, including sale items. One check is earned from GE for every $500 of charges on the card from any company, including those not participating in the new program.

New credit card

Stores and services participating in General Electric's new credit card.

Athletic X-Press

Builders Square

Bullock's

Champs Sports

Cinemax

Circuit City

Foot Locker

GE Appliances

Going to the Game!

HBO

Hertz

Hyatt Hotels

Kmart

Kids Foot Locker

Kids 'R' Us

Kinney Shoe

Lady Foot Locker

Macy's

Northwest Airlines

OfficeMax

Sports Authority

Sprint

Toys 'R' Us

Waldenbooks

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