Eyes on Credit: Danger Seen in High Platinum Credit Lines as

Credit industry analyst Stuart A. Feldstein worries about the timing of banks' popular platinum card offers.

Because large credit lines are a big part of these cards' appeal, they may simply be giving consumers a new and easy way to overextend themselves, said the president of SMR Research of Hackettstown, N.J.

"The platinum card trend flies in the face of logic," Mr. Feldstein said. "My concern is: How are lenders deciding who should get a large credit line?"

MasterCard and Visa platinum cards are advertised with tantalizing credit lines of up to $100,000. Though most cardholders get much smaller limits, Mr. Feldstein said the products should be offered only to high earners.

Unlike mortgage lenders, Mr. Feldstein said, credit card issuers seldom verify applicants' wages. He said his son-a college student with no income- recently got a platinum card offer.

"The weakest area of consumer information is income, yet you only want to make large credit lines available to the people who can pay for them," Mr. Feldstein said.

Platinum exploded quickly in the bank card market. By one estimate, there were 11 million such bank-issued cards in circulation last fall, versus two million a year earlier.

BAIGlobal Inc., a Tarrytown, N.Y., firm that tracks credit card solicitations, said 41% of the 881 million card offers in last year's second quarter were for platinum.

At the same time, personal bankruptcy filings have surged, reaching a record last year of 1.3 million. Visa U.S.A. estimates the total will grow to 1.5 million this year. Moreover, bank card debt is 15% of bankruptcy debt.

Officials at Visa and MasterCard International said there is no evidence that platinum cards fuel bankruptcies.

Both associations point to research showing that fewer than 1% of card accounts end up in bankruptcy.

The associations are lobbying for bankruptcy reform to make writing off card debt more difficult. "Now is the time to address the fundamental flaw in the system," said William P. Binzel, MasterCard's vice president of government relations.

Mr. Feldstein said his concerns stem from a spike in credit available on cards in the United States.

His research shows that credit card issuers-banks and nonbanks-extended a combined $901 billion of credit in 1993. By 1996, that total had more than doubled, to $1.8 trillion.

"Consumer spending did not double in those three years, nor did our population," said Mr. Feldstein.

"Unless card issuers get better at predicting bankruptcy, this is too big a risk."

Some industry experts said platinum card promoters do not offer very large credit lines. MasterCard, for instance, requires member banks to extend a minimum $5,000 credit line for its premium product, the World MasterCard.

Visa does not dictate premium product specifics in the United States.

Industry observers said the biggest bank platinum issuers-such as MBNA Corp. and First USA-are typically offering lines of at least $25,000. First USA, owned by Banc One Corp., said its platinum card minimum is $5,000.

At least one banker, whose bank is marketing platinum cards, said Mr. Feldstein raised a legitimate point.

The size of credit lines is a concern "because no one has any experience," said the card executive. "The jury still has a long way to go" to decide whether platinum cards are exposing lenders to more risk.

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