AT&T Plans To Issue Credit Cards Combined With Phone-Charge Cards
NEW YORK (AP) _ AT&T is negotiating to issue credit cards that would combine its current telephone charge cards with MasterCard and Visa bank cards, industry sources and a company involved in the negotiations said Wednesday.
Under the plan, American Telephone & Telegraph Co. would issue so-called ″affinity″ credit cards through a Georgia bank to a group of its existing phone card holders. The cards could be used to charge AT&T long-distance calls as well as the goods and services traditionally purchased with bank cards.
With 40 million in circulation, the AT&T phone cards are the most widely held charge cards in the country and give the company a huge roster of potential customers for the new cards.
US Sprint, the nation’s third-largest long distance phone company, in December began issuing a Sprint Visa Card that combines the features of its phone charge card with those of the bank card.
AT&T has been in negotiations with Synovus Financial Corp., a bank holding company based in Columbus, Ga., to issue the credit cards, Synovus said.
Total System Services Inc., a Columbus-based credit card service company controlled by Synovus, would process the transactions from the AT&T cards under the plan, TSS said. TSS is the nation’s second-largest credit card transaction processing company.
AT&T spokesman Bruce Reid confirmed the negotiations were occurring.
″We’re in a highly competitive marketplace and looking at a number of ways of enhancing the AT&T credit card,″ he said. The card competes with similar cards issued by Sprint and MCI Communications Corp., the second-largest long distance phone company.
Reid also confirmed reports that AT&T hired several credit card experts in recent months, including Paul Kahn, former head of First Chicago Corp.‘s card division; Fred Winkler, former president of Citicorp.’s largest credit card operation; and Alan Schultheis, a former top executive with MasterCard International.
Reid declined to comment further on AT&T’s plans.
Neither MasterCard nor Visa U.S.A. Inc. would discuss the AT&T proposal.
According to the Wall Street Journal, AT&T will announce its credit card plans in an advertising campaign starting March 26. The Journal said AT&T would waive the card’s annual fee for at least the first year and offer a lower annual interest rate than most other bank cards, in the 14 percent to 15 percent range.
The current long-distance phone cards are not revolving credit accounts like MasterCard or Visa, meaning balances must be paid in full each month.
Several industry analysts said they believed AT&T at one time considered issuing its own credit card to compete with MasterCard and Visa. AT&T would not comment on the speculation.
Fierce competition in the credit-card industry may have dissuaded AT&T from such a plan, said Robert Morris III of Goldman, Sachs & Co.
Sears, Roebuck and Co.’s Discover Card was the last separate national card to break into the industry and the retailer endured several years of steep losses before it turned the operation around.
American Express began offering its Optima revolving charge card to holders of its regular credit cards several years ago.
Morris said AT&T evidently believes it can increase the use of its phone network through the new credit cards. In addition, the company would get a share of the interest and fees charged to cardholders.
Sprint said it launched its Visa card, in conjunction with State Street Bank and Trust Co. in Boston, to help promote use of its phone network.
″It was a way of targeting high-travel users who spend a lot on telecommunications,″ said Hal Poel, Sprint’s director of card marketing.
He said direct-mail solicitations for the combined Visa-phone card have attracted more applicants than mailings for Sprint’s FONCARD alone.
With the Sprint Visa, phone calls charged on the card appear on a customer’s monthly Visa bill and can be charged to the Visa account.
MCI has no plans to issue affinity credit cards, said spokesman John Houser. ″There seems to be enough players in there right now,″ he said.