Merged bank to be No. 1 in credit-card market

Top issuer of credit cards for Visa, MasterCard


NEW YORK - Another bank merger, another transfer of plastic in your wallet.

For many consumers who have witnessed one bank after the other combine, this era of merging and purging is familiar. Now, it's just a matter of time before credit card customers of J.P. Morgan Chase & Co. and Bank One Corp. are sent new cards - that is, after the companies do market research to determine which one has the stronger brand.

However the card is branded, it will most likely come with new terms.

"Watch your mailbox," said Robert Hammer, a credit card industry consultant. "If you've never read a disclosure before, you'll want to read it now."

The combination of J.P. Morgan Chase and Bank One would produce the country's largest issuer of Visa and MasterCard credit cards, effectively giving 95 million cardholders a new card company and further consolidating consumers' debts among a few big players.

Card customers of the banks may have to deal with the inconvenience of new account numbers, particularly since Bank One primarily issues Visa cards while Chase predominantly offers MasterCard.

Under rules set a few years ago by the Justice Department, the combined bank will have to choose to concentrate on one brand or the other, analysts said.

Even so, customers with checking accounts should be able to look forward to a larger network of automated teller machines and a broader choice of other financial products.

In particular, J.P. Morgan Chase's customers in the Northeast will finally be able to find an ATM in the Midwest, and Bank One's customers will have access to the No. 4 mortgage lender.

But consumer advocates argue that such large banks have the power to charge higher fees and a tendency to share their customers' information with too many affiliates.

Merging banks also often seek to cut less profitable businesses, which typically mean branches in poor neighborhoods or services to customers with lower incomes, these advocates said.

Furthermore, consumer advocates say the merger cycle is gradually eliminating people's financial options.

Once J.P. Morgan Chase acquires Bank One, and once Bank of America Corp. completes its acquisition of FleetBoston Financial Corp., 75 percent of the nation's credit card debts will be owed to 10 banks, according to The Nilson Report, a trade publication in Oxnard, Calif.

"Where are people going to go to find competitive rates?" asked Linda Sherry, editorial director of Consumer Action, an advocacy group in San Francisco. "It's so homogenized that there's no choice out there for consumers. And that's an issue."

For the past eight years, Sherry has directed Consumer Action's annual survey of credit card interest rates, late fees and other service terms. She says the offerings have become more alike as banks have consolidated.

"You would think that these banks would want to set themselves apart from their competitors," she said. "But there's a kind of a follow-the-leader mentality."

Late fees of $35 are a recent example, she said.

At the same time, consumers are increasingly relying on credit and debit cards, with 2003 representing the first year cards were used more than checks, the American Bankers Association said earlier this month.

Together, J.P. Morgan Chase and Bank One will own about $125.1 billion in credit card balances, giving the combined company an 18.9 percent share of the market, according to The Nilson Report, as of the third quarter of 2003. That compares with $114.1 billion in balances, or 17.2 percent of the market, owned by Citigroup.

Those numbers do not, however, include credit cards limited to certain retailers, like Sears or Home Depot. Counting such store cards, particularly its Sears cards, Citigroup would remain the largest card issuer, with $146 billion in balances.

Stephen Brobeck, executive director of the Consumer Federation of America, said in an interview, "We would not expect the new institution to lower their prices for consumers, because in many markets, their size will give them overwhelming market power."

After the merger, J.P. Morgan Chase will have 2,300 branches and 6,000 ATMs across 17 states. Speaking to analysts yesterday, William B. Harrison Jr., chairman and chief executive of J.P. Morgan, said the combined company did not plan to close any branches unless required to do so by the government.

He also said that each company's history of mergers would virtually ensure a smooth transition. He said that he and James L. "Jamie" Dimon, the chief executive of Bank One, "have been through as many of these as any combined two executives out there."

Dimon added that the banking industry's future belonged to large national banks. "The business has been consolidating. It will continue consolidating," he said.

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