Chase Manhattan Corp. has joined the growing ranks of credit card issuers that are dangling an introductory rate to attract new customers and a tiered pricing structure to retain profitable customers.
Chase this week announced that new customers will qualify for a no-annual-fee card with a variable 9.4% rate for purchases and balances transferred from other cards. Some of Chase's best existing customers will also qualify for the promotional rate, which is good until Jan. 1, 1995.
After that, a rate of prime plus 10.4 points for classic cards and prime plus 9.4 for gold cards will apply. At today's prime, the rates would be 16.4% and 15.4%, respectively. But under the tiered pricing schedule, many customers may qualify for better rates.
The rate schedule gives preferred rates to customers who maintain a Better Banking account at Chase and those who carry a high balance. The reward to customers who use the other Chase banking services reflects a trend in the industry to position the credit card as an integral part of a broad program of retail banking services.
Analysts said Chase's pricing moves were designed to solidify the bank's card base in a highly competitive environment.
"If you look at the numbers, Chase hasn't gained the same receivables growth as others in the business in the past year," said Diane Glossman, a bank analyst for Salomon Brothers Inc. "I would look at this as one in a series of steps to bolster the business."
Robert McKinley, president of RAM Research Corp. of Frederick, Md., pointed out that eight of the top 10 bank issuers, including Chase, face the loss of accounts to card marketing specialists and that single-digit introductory rates and tiered pricing have been in vogue for some time.
Chase is a Johnny-come-lately," Mr. McKinley said.
Although Chase is second only to Citicorp as a card issuer, with 8.3 million accounts, RAM Research's October listing of the top 10 issuers places Chase behind MBNA America Bank in terms of outstanding balances, with $9.8 billion to MBNA's $10.2 billion.
The tiered pricing schedule expands on a program introduced in August 1992, in which classic card holders in good standing, with a balance below $2,500, could qualify for a rate of 16.4%, and those with a higher balance could pay only 14.4%. Gold card members get a rate one percentage point lower in each case.
Under the new program, classic card holders with a balance under $2,500 who also have a Chase Better Banking account would pay 14.4%. Those with a higher balance will qualify for a 12.4% rate. Gold card holders will pay 13.4% interest with a balance under $3,500, and 11.4% for maintaining a higher balance.
Cardholders with a non-Better Banking Chase account -- such as a Vista mutual fund account or a mortgage -- will get a 15.4% rate on classic cards when their balance is under $2,500 and 13.4% when their balance is over $2,500. Gold cardholders will be charged one percentage point less in each case.
Before August 1992, Chase cardholders paid a 19.8% fixed rate, which is still charged on cash advances.
