Wading deeper into Internet waters, First USA announced marketing relationships with two more Web-based companies.
The credit card unit of Columbus, Ohio-based Banc One Corp. said it will launch a cobranded card in May for Auto-By-Tel, an automobile dealer that does business exclusively on the Internet.
First USA said it also has obtained exclusive rights to card advertising on the Excite search engine.
Consultants see First USA, one of the biggest direct-mail solicitors in the card industry, trying to replicate its strategy in cyberspace by putting its name and product offerings as often as possible within sight of Web surfers.
"The Internet will become a viable source of new accounts for us, but direct mail is still far and away the primary source," said a spokesman for First USA.
The company is also steeped in cobranding, offering cards through many interest groups. Its partnerships with big names in the Internet world seem to indicate virtual cobranding ambitions.
A recent report by the U.S. Department of Commerce said 10 million people in the United States and Canada had made an on-line purchase by yearend 1997, up from 4.7 million six months earlier.
First USA made its first play for the on-line crowd in 1996 with an America Online cobranded offering. That card was the first to offer rebates on Internet purchases.
The issuer declined to state customer numbers but said the card's high visibility on the America Online network - it is often on the first screen users encounter - and the introduction of a fixed 9.9% interest rate this year have made it successful.
First USA also issues a cobranded card for a competitor of Excite, the Yahoo search engine.
The Excite home page will alert visitors to First USA card products related to key word searches they make. Plans are also under way to issue an Excite-branded affinity or cobranded card.
"The driving force behind this relationship is that we are going to reach millions of people with offerings targeted to their interests," the First USA spokesman said.
The relationship with Auto-By-Tel will produce a "Mobalist Rewards" Visa card, enabling consumers to earn a 1% rebate on all purchases.
There is no cap on the reward dollars cardholders can earn annually, and rebates can be applied toward the full purchase price of any vehicle bought through Auto-by-Tel.
The interest rate is fixed at 9.9%, and unused rebates expire after five years.
Separately, Auto-by-Tel is marketing a free Mobalist membership card that offers up to a 20% rebate if cardholders buy from certain on-line retailers. Cardholders are to be allowed to combine the rebates from both cards when buying a vehicle.
Industry experts said the Mobalist Visa could be the best auto rebate program, outpointing the Citibank Driver's Edge program.
A replacement for Citibank's cobranded card with Ford Motor Co., Driver's Edge gives a 2% rebate on purchases, up to $500 a year. The credits are capped at $1,500 per vehicle purchased.
One consultant cautioned that such rich rewards could ultimately spell trouble for Dallas-based First USA.
The company "might be giving away more in enhancements than it can make in profits," said Michele Turkel, president of Scarsdale, N.Y.-based Spectrum International Consulting Corp. "A lot depends on the way the costs of the program will be shared between the companies."
Ms. Turkel said Auto-by-Tel's unlimited rebates are worrisome. "A very high cap would make me feel more comfortable than no cap at all," she said.
High costs have derailed some high-profile partnerships in the last two years. Expenses were the reason Citibank and Ford slammed on the brakes.
To cause trouble, "it only takes a few cardholders to spend $25,000 on this card a year," Ms. Turkel said. "If someone really has the intent to buy a car and gets this credit card a year or two before they do, it could be dangerous."
Stanley W. Anderson, president of Anderson & Associates in Arvada, Colo., said his chief concern is the longevity of Internet companies. "First USA has selected two relatively stable partners," he said, but "there is an inherent risk for a card issuer to associate with any particular group" on the Internet.
Excite is a good bet, Mr. Anderson said. "If the affinity group falls apart for whatever reason," he said, "then the bank has the expense of trying to retain those customers and move them to another card."
Despite her misgivings, Ms. Turkel praised First USA for its willingness to take a risk.
"It is interesting that First USA is looking at new technology while its biggest rival, MBNA, is sticking to traditional marketing," she said. "Whether these programs are successful or not, the knowledge First USA will gain from these programs is going to be terrific."
