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GE Plans to Enter Credit Card Fray

August 13, 1992

HARTFORD, Conn. (AP) _ General Electric Co. could have a tough time attracting customers in an already oversaturated credit card market - but analysts say a few innovative ideas could help.

The company’s financial subsidiary, GE Capital Corp., plans to begin test marketing a plastic card later this year, GE spokesman Anthony Zehnder said Wednesday from the company’s headquarters in Fairfield.

Zehnder said GE was considering trying to attract new cardholders by offering them a chance to earn discounts on GE appliances for using the card.

That approach appears similar to a reported plan by General Motors Corp., the nation’s leading automaker, to enter the credit card business as well. GM’s inducement for potential card customers is said to be discounts on its cars.

Analysts said GE has little choice but to offer such incentives.

″It’s really tough now for any new player to come in,″ said Robert B. McKinley, of the Maryland-based RAM Research Corp., which tracks credit card rates. ″They are going to have to stand on their heads for people to notice.″

The card also would put GE in direct competition with banks and other non- bank credit card issuers. Besides GM, which hasn’t officially announced its card, American Telephone & Telegraph Co. is a major player in credit cards.

″I think it’s bad news for traditional big banks that have gotten away with high interest rates and fees,″ said Elgie Holstein, president of Bankcard Holders of America, a consumer advocacy group in Herndon, Va. ″It gives consumers more choices.″

GE is not new to the credit business. GE Capital Corp.’s Retail Financial Services division handles the credit card portfolios of 300 stores in the United States, Canada and Europe, including big retailers like R.H. Macy & Co. Inc. Analysts said GE Capital is well respected in the credit industry.

The company has the potential of becoming a top credit card issuer if it taps the 40 million cardholders in credit card portfolios it manages for U.S. retailers. But the company said Wednesday it had no plans to do that.

″We have no intention of converting our private-label clients,″ Zehnder said. ″These will be all new cardholders.″

Industry experts said for the card to succeed in winning clients from competitors, GE would have to offer attractively low interest rates and services that outdo the competition.

″The pie is pretty much set,″ said McKinley, ″But if you are offering the right type of product and services, people will move. GE certainly has deep pockets and can do that.″

Zehnder said the card will be tested in selected local markets but declined to name them. He also refused to say how many customers the company planned to solicit for the test marketing.

The Wall Street Journal reported Wednesday that GE might spend as much as $20 million to promote the card during testing. The newspaper said advertising could hit $80 million to $100 million in the first year.

The newspaper, quoting unidentified executives it described as familiar with the venture, said the card would most likely be a GE-MasterCard and would be issued through retailers whose credit card operations are managed by GE Capital.

The struggle among card issuers for customers is intense. Some of the lures are low interest rates, no annual fees or services ranging from free accident insurance to frequent flier mileage.

AT&T, which launched its card two years ago, is now the nation’s third- largest credit-card issuer behind Citicorp and Chase Manhattan in total accounts and number of credit cards, but lags far behind them in terms of debt owed.

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