American Express Co. on Tuesday launched its first credit card since 1987, when the illfated Optima card was introduced.
The new Optima True Grace Card is the first of 15 or so credit products that the financial services giant plans to introduce this fall and next year and market largely to people outside its card base.
It had been widely known in the card industry that American Express intended to commit marketing muscle to these revolving credit products. In recent months, the company has revealed that it is aiming to have $30 billion in outstanding receivables by the year 2000.
The True Grace Card alone is expected to garner about one million carhdholders over the next six months, American Express said. However, the various wrinIdes that will distinguish each product will keep the industry vigilant.
The True Grace Card will give consumers an extra cushion on new purchases. Phillip J. Riese, president of cardmember financial services for American Express, said that cardholders will have essentially 40 days to pay for their new purchases before an interest rate is assessed.
Other perks Will include a 7.9% introductory rate for the first six months - the rate will jump to prime plus 8.75% after the promotional period ends and no annual fee for the first year. Thereafter, if customers use the card three times a year, they avoid the $25 fee.
American Express, which has conducted extensive consumer research since its original Optima product failed because many cardholders defaulted on their credit card loans, says grace periods are important to consumers.
Industry observers, however, caution that one of the challenges in communicating the benefits of the new American Express product will be education, because . consumers don't fully understand how grace periods work.
Robert B. McKinley, presi dent of RAM Research Corp., a credit card tracking firm, said, "Grace periods are a difficult concept to get across to con sumers, because they believe they have a grace period anyway, and now American Express seems to be saying, 'We are going to tell you something you don't already how.'"
Mr. Riese argued that the idea of an ill-informed consumer is outdated. "Maybe a year or two ago, people said that consumers didn't understand rates and fees," he said.
Mr. McKinley said that American Express chose a good time of the year to launch a product, because the recent interest rate increases have created a climate conducive to comparison shopping.
The True Grace Card will not have the same linked benefits as the first Optima card to the company's flagship charge card. For example, cardholders will not be eligible for the Membership Miles frequent-flier program or the Optima Rewards programs standard features of the original Optima card.
ATV campaign for the new American Express product will begin this week. The commercials feature contentporylifestyle guru Martha Stewart as spokeswoman for the card.
Ms. Stewart was selected, said Mr. Riese, because American Express' traditional card is "oriented toward travel and entertainment and tends to be more male." The new product "is targeted to bring in a greater balance between men and women," he said.