American Express Co.'s Optima True Grace card is no more.
Once touted as a landmark product, it allowed a 25-day grace period after purchases before interest would accrue.
"Many people found it hard to understand," said Emily Porter, spokeswoman for the company, which recently began notifying customers about the demise of True Grace. "It tended to be one of the less popular cards we offered" and, in fact, had not been actively marketed since early 1996.
The card's quiet end contrasts with the fanfare when it hit television airwaves in September 1994. A multimillion-dollar advertising campaign from the Ogilvy & Mather agency featured lifestyle guru Martha Stewart.
At the time, American Express was trying to emphasize it was in the business of offering credit cards-not just charge cards that had to be repaid each month-and that its products differed from those offered by banks.
Unlike most MasterCard and Visa cards, True Grace guaranteed the interest-free 25 days on new purchases even if there was already a credit balance on the account.
But True Grace was criticized for being too complicated and simply not compelling. American Express had to explain in marketing materials how grace periods worked and how much its product could save cardholders.
"That card was targeted to people who go into it knowing that they will carry a balance," said Bruce Brittain of Brittain Associates, an Atlanta- based credit card research firm. It was a tough sell, he said, because most people do not want to admit that they are not going to pay off their full balances each month.
Mr. Brittain's research indicated there were 1.6 million Optima True Grace accounts by September 1995-the portfolio's peak year. The total dropped to a little over one million a year ago.
Canceling True Grace "tells me that Amex is living in the real world and that they really care about their bottom line," said credit card consultant and former American Express official Michele Turkel.
Ms. Turkel, president of Spectrum International Consulting Corp., Scarsdale, N.Y., said it was unusual for American Express to discontinue a product, which may signal a culture shift. "This is what banks do all the time when a product is not successful," she said.
True Grace marked American Express' comeback into credit cards after a failed and costly entry into revolving credit a decade ago. The first Optima offering, available only to Amex charge card customers, was the victim of poor credit screening and huge writeoffs.
Ms. Porter of American Express said other Optima products-including cobranded cards with Hilton and Sheraton hotels, Delta Airlines, the New York Knicks, and New York Rangers-are doing well, though.
"The rewards-based products tend to be more popular," she said. "We are focusing our resources on the products that have the highest return."
Of the 15 Optima programs and their 50 variations, the most popular are Delta SkyMiles and Optima Gold. The latter offers an interest rate four to six percentage points above the prime rate.
True Grace customers are being offered a new card with a standard 25-day grace period, which benefits only those who pay off their balances in full. The interest rate on it is lower, though, than the 17.25% on True Grace-it can range from 15.49% to 16.75%, depending on spending and payment history.
