Chase makes another move in catch-up game; offers rewards to active users.

In introducing a credit card last week that offers cash rewards, Chase Manhattan Corp. took the next step in a yearlong effort to catch up with the rest of a market that has latched on to the value-based marketing concept.

Many of Chase's competitors, most recently AT&T Universal Card Services, have also jumped full-force into rebates and similar incentives.

Chase is making an aggressive play. The credit card unit said it plans to announce a major co-branding partnership within a few weeks. Chase has talked with automakers, petroleum companies, and regional telephone companies, including Nynex Corp.

'Step in the Right Direction'

"They were really late to the game in terms of introducing new products and pricing methodolgies," said Diane B. Glossman, an analyst with Salomon Brothers Inc. The announcement last Thursday "is one of a series of moves to cunter that."

"It's a step in the right direction," said George Salem, an analyst with Prudential Securities. He said the "game plan [is] well conceived."

With the product, called CashBuilder Visa, cardholders can earn cash rewards based on both spedning and finance charges. Chase said that feature is unique, allowing it to make the increasintly difficult claim that it has come with an idea before anyone else.

Chase also made a pointed comparison between CashBuilder and the Discover card, which gives bonsues only on spending, and at higher levels.

Market Share Lost

Chase's sluggish reaction to changes in the market resulted in a loss of market share. At one time, Chase was the second-largest credit card issuer, but at the end of last year it ranked fifth in outstandings, with $10.2 billion, according to RAM Research Corp. of Frederick, Md.

In its most recent report on Chase Salomon Brothers noted that Chase's charge volume in the first quarter rose 10% and net new accounts doubled these generated a year earlier.

John A. Ward 3d, Chase's executive vice president in charge of credit cards, said of CashBuilder, "If anybody likes Discover, they're going to love this card. If you like cash back, this will be the best card on the market."

CashBuilder customers who charge $200 or more in sales or cash advanced in a month earn a 1% rebate. Also, for every month the cardholder carries a balance, he or she will earn 10%. Cardholders can redeem these rebates when they reach $500, or after three years, whichever comes first.

With Discover's cash reward program, customers get 0.25% on the first $1,000 in purchases, or $2.50; 0.5% on the second $1,000, or $5; and 0.75% on any part of the third $1,000, up to $7.50. Purchases over $3,000 earn 1%.

Cash advances are not eligible, and cardholders do not get reabtes from finance charges.

If a CashBuilder customer charges $200 and receives the 1% rebate for purchases and 10% for finance charges, Mr. Ward said, the effective interet rate is 14.3%.

This compares favorably to the GM Card's 16.4%, the Citibank-American Airlines Advantage card's 15.4%, GE Rewards card's tiered 14.9% and 18.4% rates, and Discover's 14.9%, 16.9%, and 19.8% rates.

The Chase card has a prime plus 9.15% interest rate on purchases, and prime plus 10.15% for cash advances. It comes without an annual fee and a 25-day grace period.

For the Frequent User

Mr. Ward said CashBuilder does not compete with Chase's own "reward consolidator" credit line that carries at 11.1% rate. That product has been marketed to people who carry credit cards at higher rates.

CashBuilder "is ideally suited for someone who uses a card frequently," Mr. Ward said, "and who borrows from time to time."

Cardholders can transfer balances to CashBuilder and earn a one-time 1% rebate.

Chase began a nationwide direct mail program for CashBuilder Bisa on Friday, and will folow that up with advertising this summer.

It will also alert other Chase credit cardholders sot they can switch to the green-colored rebate card if they wish.

Like AT&T, which rewards customers for maintaining balances, Chase is trying to stem attrition and build its customer base, while boosting interest income.

"I'm sure they're all racing to do this because this is where they earn the most money," said Ruth Susswein, executive director of BankCard Holders of America in Herndon, Va.

Consumers may do better by sticking with low-rate cards, she said. "I wonder what the saturation point is for the consumer. At what point do they throw up their hands and say, "Enough, I'll just take what I have and use it'?"

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