NEW YORK (AP) _ Citicorp is buying AT&T's Universal credit card business for $3.5 billion in cash, extending its lead as the nation's biggest credit card issuer.

The deal, which had been rumored for two days, was announced this morning.

Citicorp's Citibank division said it plans no immediate changes to the Universal card or its operations.

AT&T had introduced the cards in 1990 with a promise of no fees for life, and banking analysts expect Citibank will examine whether to start charging an annual fee on the cards.

Citibank already issues Visa, MasterCard and specialty cards, some of which charge an annual fee.

AT&T put the card business up for sale earlier this year as it seeks to focus on refocus on its core business of telephone and other communciations services.

The deal gives Citibank another 13.6 million accounts on top of its own U.S. total of 24.9 million accounts for a total of 38.5 million accounts.

The Universal card business has about $15 billion in cardholders' debts, boosting Citibank's total to about $61 billion.

That is well ahead of MBNA Corp., which is now the second-largest issuer with $42 billion in receivables.

``We view this agreement as the marriage of two powerful brands that will offer tremendous benefits for all our customers,'' said Dan Somers, chief financial officer at AT&T.

Customers of the Universal card ``can expect to receive the same features and benefits that they now receive from the card,'' the announcemnet said.

The Universal card business is based in Jacksonville, Fla., employs 4,000 people and has facilities in Salt Lake City, Utah, and Columbus, Ga.

The deal, approved by the boards of both companies, is subject to regulatory approval but is expected to close by July 1998.