Bringing more—and cheaper—services for charge-it customers
Already 590 million of them fatten Americans' wallets and purses, and the easy, pay-later access to goods and services that credit cards offer extends to such exotica as Nevada divorces, surgical work and, in some areas, bail money. Now the ever inventive credit card companies are poised for a new phase of expansion. Growing twice as fast as in recent years, the amount of purchases billed on cards so far in 1978 is up 40%. Americans spend $16 billion a year on cards, and the total is expected to soar to about $50 billion in the late 1980s.
Still, there is much room for expansion. Of the 50 payments of various kinds that the average U.S. family makes each month, cards are used for only two or three. To increase that share, card issuers are coming out with many new services:
Split billing. In the high-spending travel-and-entertainment card field, Diner's Club is introducing the "Double-Card." A subscriber gets two cards: one for personal use, another for business expenses. The monthly bill separately lists the items charged on each. Through Double-Card, Diner's (3.2 million cardholders) hopes to close in on American Express (9 million).
Rebates. Visa, which with nearly 60 million holders has overtaken the longtime leader in the field of multipurpose cards, Master Charge (50 million), is testing in several Midwest states an Execu-charge card aimed at big-spending businessmen. Among its attractions: cardholders get a 1% rebate on all charges.
Direct debiting. Though Visa and Master Charge cards have traditionally been issued only by commercial banks, other lending institutions are preparing to jump into the field. A mutual savings bank in Washington State has issued a card that directly debits a customer's savings account for the amount he charges. Some 60 banks are now issuing Visa cards that debit directly against a cardholder's checking account.
In addition, some banks are mailing "preapproved" card applications to potential customers who are rated good risks. They do not have to provide lengthy statements citing credit references and salary, but merely mail back a short, signed form. Over the past 18 months, Chicago's Continental Illinois bank has acquired enough new preapproved Master Charge customers to make it one of the top ten U.S. card issuers.
Most of the new action by card firms is in a long-somnolent field: traveler's checks. American Express has about 65% of the world market, despite recently heating competition. But the check business, argues Visa International President Lee W. Hock, "has changed very little in the past 50 years. It is ripe for innovation."
Diner's Club is offering checks through an arrangement with Thomas Cook & Sons; they are free, while American Express charges $1 per $100 in checks. Master Charge plans to begin selling traveler's checks, probably by late next year, and will allow them to be charged on its card. Visa is also considering a traveler's check venture.