The GE Rewards card's cashback program pumped up the volume in 1994, more than doubling its household penetration, while the Discover card had flat growth and lower revenues, a consumer survey has found.
Revenues for the Discover card could be as much as 30% lower than last year's due to a decline in balance carriers, lower balances among revolvers, and a shrinking number of Discover's Private Issue Card owners paying the $40 annual fee, according to Brittain Associates Inc., which did the survey.
The study, based on telephone interviews with 4,000 consumers nationwide, found that about 18.5 million households own a Discover card, compared to 18.4 million in 1993.
"It edged up by 100,000; that's a small growth curve," said Bruce Brittain, president of the Atlanta-based research firm.
On the other hand, the survey bodes well for GE Capital Consumer Card Co., which revamped its GE Rewards program this year. Mr. Brittain said the GE Rewards card has generated card ownership growth of 109% since last September, to about 1.2 million households, or 2.1 million cards.
He attributed the increase to GE's simplified rebate structure and its elimination of the annual fee.
Although Mr. Brittain said that the Discover card is still contributing a significant profit to Dean Witter, Discover & Co.'s bottom line, the study indicates slippage.
"I think Discover is caught up in a general consumer trend toward trying to pay balances down, reining in credit card debt a bit," he said.
The card is seen as not having competitive interest rates. With a tiered interest rate approach, its lowest offering is 8.9% more than prime, or 16.65% currently.
Beth Metzler, spokeswoman for Dean Witter, said she hadn't seen the most recent Brittain survey but "reports he put out in the past have not jibed with our numbers here."
Card members are increasing steadily, she said, adding: "At yearend 1993, we had 40.2 million card members, and our most recent number for 1994 is 41 million card members. We're not stagnant in any way."
Discover's Private Issue numbers are increasing as well, said Ms. Metzler.
Mr. Brittain has "been putting out reports about Discover since way back when, and every year, there are inaccuracies both on the high and low sides," she said.
"Discover disputes our numbers when the news is bad and supports it when the news is good," said Mr. Brittain. "We have no ax to grind; I'm just trying to report what was found."
Dean Witter's quarterly earnings report indicates that, in the credit services division, which oversees card products, secondquarter net operating revenues rose 25%, to a record $561.3 million. The number of Discover accounts grew to 30.1 million, increasing by 485,000 from the end of the first quarter and 2.6 million from a year earlier.
The quarterly report also said that higher loan portfolio balances and an improved rate of chargeoffs had led to a 32% increase in managed-loan, net credit income.
Still, Mr. Brittain said, "my study is a tracking study." It indicates that "the trend is going the wrong way for them."
He said Discover's new $25 rebate offer is a response to a stagnant growth curve. Until Nov. 10, new applicants will get a check for $25 after charging $75 on their cards.
"It's part of our ongoing marketing effort," Ms. Metzler responded. "We're always looking to increase card members -- any company would want to increase their program."
Turning to the GE Rewards card, Mr. Brittain found "successful growth."
"Last year, they were just treading water," said Mr. Brittain. But after a year, ownership went from 564,000 households to 1.2 million, he said.
Mr. Brittain said he cannot discern more detailed trends for the GE Rewards card, such as balance carrying, because there aren't enough households with the card to make results statistically significant.
Daniel R. DeMeo, marketing manager for Cincinnati-based GE Capital Consumer Card Co., said it now offers consumers up to 2% cash back on purchases, which he said is double the Discover card's rebate. All new card members are offered a rate of 8.9% more than prime.
