Riding the cobranding wave, Unocal Corp. has become the latest retail merchant to convert part of its in-house credit card business to b bank cards.

Los Angeles-based Unocal, the nation's ninth-largest petroleum marketer, joins Amoco, Texaco, Getty, Shell, and others in offering MasterCard and Visa cards with the cooperation of issuing banks.

Unocal's announcement last week is part of a trend resulting from efforts by banks and their card associations to link the MasterCard and Visa brands with those of outsiders.

MasterCard gained a clear lead by allowing the likes of American Telephone and Telegraph Co. and General Motors to offer its brand, while Visa called a moratorium to reassess its policy.

Now that Visa is squarely back in the cobranding business -- two of its higher-profile signings were Ford Motor Co. and the Nordstrom department stores -- competition and cobranding activity are heating up.

1.5 Million Targets

Unocal will be one of the most ambitious bank card marketers in its industry, targeting 1.5 million of the 3.7 million holders of its private-label cards in the West and Midwest for both MasterCard and Visa cards.

Associates National Bank Delaware, a Ford affiliate, will be the formal card issuer, a role it plays for several other oil companies.

"Everyone's going to try it," said H. Spencer Nilson, president of The Nilson Report, a newsletter published in Oxnard, Calif. "Cobranding is a way [for retailers] to combat the infiltration of bank cards."

Bank cards accounted for 25% of the $42 billion of card spending at U.S. fuel outlets last year, according to The Nilson Report.

Cobranded oil-company cards generate brand loyalty and provide revenue otherwise lost to bank card issuers, Mr. Nilson said.

"Offering the new Unocal 76 cobranded credit cards is an important step in attracting and retaining a loyal customer base for the company," said Neal E. Schmale, senior vice president of Unocal and president of its petroleum products and chemicals division.

"The new cards will make the use of credit easier and more rewarding for Unocal customers by effectively reducing the cost of gasoline purchases," he added.

In their cobranded programs, oil companies offer rebates good for purchases at their gas stations to retain customers.

Since July, Amoco, the nation's leading gasoline marketer, has been offering a 3% rebate on purchases made at Amoco stations on its cobranded Visa and MasterCard cards issued through MBNA America Bank. (That program is not on the accompanying chart, because it is not a "premium" service.)

Unocal is offering a !% rebate on its cobranded cards. The rebate will be credited on the monthly cardholder statements against purchases from Unocal 76 stations.

The Unocal cards have no annual fee and carry an introductory interest rate of 7.6% for the first six months.

Unocal will continue its existing private-label program, even though such businesses are motivated more to maintain customer loyalty than to make a profit. Gas cards have lower charge volumes and more sporadic usage than popular general-purpose credit cards, and their balances generally do not revolve.

Customers tend to use service stations convenient to their homes, and they share cards with other family members.

"There are 117 million oil-company cards," Mr. Nilson said. "Why do people want them? They like to keep oil company charges separate."

Trend Seen Inevitable

The Nilson Report predicts fewer consumers will want gas cards in the future, and fewer will pay for gasoline purchases with cash.

"You can't stop some migration from oil company cards to bank cards," Mr. Nilson said. "You can retain those people through a cobranded card."

In 1992, 58% of Unocal's customers paid with credit -- more than at any other oil company, according to the Nilson newsletter, which estimates its total sales at $4.2 billion.Cobranded premium credit cards of some major petroleumretailers* Cards, in Interest Card name thousands rate** IssuerAmoco Multicard 1,200 15% Associates Torch Club 240 15 Diners Club Execu-Charge 300 19 AssociatesTexaco Star Member 1,278 19.75 First of OmahaMobil Mobil+ 450 19.75 First of OmahaChevron Premium 324 19.75 First of OmahaShell Select Member 255 19.75 First of OmahaBP America Horizon 66 18 Bank OneDiamond Club Card 36 21 Associates *All cards are MasterCard or Visa except Amoco Torch Club, which is Diners Club**Most programs charge membership fees. There is no annual credit card fee except on Torch Club, $55 Source: The Nilson Report

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.