American Express TV ad attacks embattled bank cards over rates.

American Express TV Ad Attacks Embattled Bank Cards over Rates

NEW YORK -- American Express Co. is making marketing hay out of Washington's call for lower interest rates on bank cards.

The charge-card giant unveiled a new commercial on nationwide television over the weekend that takes aim at the "outrageous interest" consumers pay to revolve their bank credit-card balances. The American Express card is for people "that don't want to get bogged down" in credit card debt, the ad proclaims.

Timing Is Fortuitous

Though the ad was planned months ago, it could not have hit the airwaves at a better time. Only three days before its debut, the Senate overwhelmingly approved a bill that would cap at 14% the interest rates banks can charge on credit card balances.

The spot even aired during some television news reports on Washington's efforts to bring credit card rates down.

Congress has since backed off its legislative efforts, but American Express is exulting in its serendipitous timing. The company has been smarting from an unexpected $88 million third-quarter loss in its Travel-Related Services unit, which had long been a cash cow.

Moreover, the company took a $24 million charge related to writeoffs on its Optima credit card that had been hidden by some employees.

Cost Is Slightly Less

Optima, a direct competitor of bank cards, charges 16.25% on outstanding balances -- higher than the 14% limit suggested by the Senate but lower the average of 19.8% charged by big banks.

The commercial is part of a larger campaign against bank cards that American Express began researching six months ago. It also includes sophisticated magazine ads in upscale publications. One shows the silhouette of a Buddhist monk contemplating a green card in a Japanese garden. "You are free of bankcard debt and the eternity of revolving interest payments," the ad reads. "You are calm."

Company officials are using the campaign to portray themselves as skillful readers of the consumer psyche.

"The population at large is fed up with the level of debt they are carrying," said Phillip J. Riese, an American Express executive vice president.

Some analysts speculate that American Express could reap other benefits from the spotlight that Washington has thrown on credit card interest rates.

D. Gordon Luce Jr., an analyst with Brown Brothers Harriman & Co., wrote last week that if card rates come down soon because of legislation or competitive pressures, banks may have to increase other fees attached to their cards. That, in turn, could open them to some of the same charges that have been lobbed at American Express by some consumers and merchants.

For instance, banks might have to raise the fees they charge merchants for processing their Visa and MasterCard receipts. That could bring the banks more in line with the higher fees charged by American Express, which has been heavily criticized by merchants.

Banks also might be forced to cut some of their volume-building card promotions, such as frequent-flyer programs offered to credit card customers.

"Such events would improve the relative position of the American Express charge card vis-a-vis Visa and MasterCard," Mr. Luce wrote, noting that "current American Express cardholders have diverted [charge volume] to competitors in order to earn mileage points."

Mr. Luce cautioned in a phone interview that such benefits would not be immediately apparent, but bear watching.

The new American Express campaign was created by the advertising firm of Chiat/Day/Mojo Inc. It is the first general campaign from the company in years to directly attack the bank cards, distinguishing it from the company's well-regarded "membership has its privileges" effort created by Ogilvy & Mather New York.

In the interest-rate commercial, the American Express card appears as a bridge between a golfer near a sand trap and a fairway on the other side. An unseen announcer talks ominously about being bogged down by bank card debt.

PHOTO : Detail from Print Ad, Part of concerted campaign

PHOTO : OPPORTUNITY: American Express is seizing on the chance to challenge bank cards on TV and in print ads like this one.

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