GM set to announce new credit card Features include new-car rebates

September 09, 1992|By New York Times News Service

General Motors Corp. is expected to announce today that it will issue a new MasterCard -- and possibly a Visa credit card -- designed to build loyalty among car buyers.

Although the world's largest automaker has been tight-lipped about the card, GM executives and analysts said the card's features include no annual fee and an interest rate set at 10.4 percentage points above the prime rate, now 6 percent.

That matches the lowest primary rate, now offered by American Telephone & Telegraph Co., although some cards offer lower rates for the best customers. The current average rate for credit cards nationwide is 18.17 percent, according to RAM Research Group of Frederick, Md.

The GM card's most noteworthy feature is that it offers up to $500 a year in rebates toward new GM cars. A consumer would have to spend $10,000 in one year on the card to receive that amount, based on the 5 percent rebate that will be capped yearly at $500. But the offer is said to be cumulative over three years, for a maximum of a $1,500 rebate.

On average, consumers spend $2,400 a year on their charge cards, an amount that would produce a $120 rebate yearly toward a GM car. But as health care companies and supermarkets increasingly accept credit cards, that figure may rise.

The terms of GM's card, considered attractive by industry analysts, will make it a competitive threat not only to other credit-card issuers, but also to Ford and Chrysler, which do not issue cards with direct incentives for buying their vehicles.

Ford offers a credit card carrying its blue oval logo through Associates National Bank, a unit of Ford's financial services group.

Like Sears' Discover card, the Associates card offers cash rebates based on annual purchases: The more one spends, the greater the percentage rebate. But because of federal regulations, Ford cannot offer direct incentives for its own products through a bank it effectively owns.

Chrysler's consumer finance company, Chrysler First, administers so-called private label credit cards for individual merchants. The company declined to say why it has not issued its own branded card.

GM's logo may be joined on the card by other companies, an auto industry analyst said. Potential candidates include the Avis and National rental car companies, in which GM holds financial interests.

Marriott Corp. seems another logical candidate, because GM's board of directors includes J. Willard Marriott Jr., chairman of the hotel chain. The nature of the incentives offered by such partners is unclear. GM is expected to announce details of the card at a news conference today.

Robert B. McKinley, president of RAM, said the low rate and the pledge of no annual fee were certain to appeal to consumers, whose loyalty to particular credit cards has dwindled in recent years. About 8 percent of all credit-card holders voluntarily switch their cards every year. "They'll have no problem signing up customers," he said.

GM will compete with many other non-banks that have issued credit cards. Such cards are part of a strategy by many companies, including automakers, to aim advertising at existing customers, who are considered easier to sell to than strangers.

GM is expected to market the card first to owners of GM vehicles.

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