Raising the stakes in the credit card wars, AT&T Universal Card Services unveiled an ambitious program to reward cardholders for carrying balances.

The plan - an enhancement to AT&T's already formidable Universal card - awards points toward gifts on the basis of monthly balances. Other reward programs, by contrast, focus on new purchases.

The new program, dubbed Something Extra, addresses what experts have called the only flaw in the AT&T card program: relatively low account balances. And rivals could soon feel pressure to offer similar plans.

* It's an idea whose time has more than come," said IC Shelly Porges, chief executive of San Francisco-based Porges/Hudson Marketing Inc.

Hunt's Opening Salvo

The two-year program is the first major initiative of David K. Hunt, a Signet Banking Corp. veteran who took charge of Jacksonville, Fla.-based AT&T Universal last year.

"Unlike other credit card programs, which encourage you to spend to get rewards, the Something Extra program allows you to earn points even as you're paying off existing purchases," Hunt said in a statement.

Customers who transfer balances from other cards get points for past purchases, he said, which they can apply to a wide range of gifts - from compact discs to Honda cars.

By introducing auto rebates, AT&T takes a competitive swipe at the Ford-Citibank card and the GM MasterCard. Those programs offer a 5% rebate toward the purchase of a Ford vehicle and a General Motors vehicle, respectively.

Record Start

The Universal card, introduced in 1990, has been one of the industry's most successful new products. It took just 78 days to reach one million accounts - a record that stood until Household International took just a month to reach that milestone two years later.

At the end of 1993, AT&T Universal ranked second only to Citicorp in active accounts, with 9 million, according to The Nilson Report, an Oxnard, Calif. newsletter.

But industry experts say that at first AT&T attracted convenience users more than customers who revolve their balances. Indicative of this, the company ranks only sixth in outstanding balances, with $8.7 billion.

Mr. Hunt has tried to change that. The average balance on an AT&T credit card account was an estimated $720 in Janus. That was up from $680 when Mr. Hunt took over last May, but was still well below the industry average of $1,000.

Analysts and rivals said the new plan should help close the gap.

"Certainly the asset of rewarding those who carry balances is very crucial to AT&T," said Robert B. McKinley, president of RAM Research, Frederick, Md. "They clearly did their homework."

"This is an important step for them to to to generate more interest-bearing receivables," said a senior credit card executive at a major New York bank, who asked not to be identified.

To enter the proem, AT&T Universal Card cardmembers first call a toll-free number, for which they receive an initial 1,000 bonus points.

Participants then earn one point for every dollar of their month-end balances. For example, a cardmember who carries a $1,700 balance each month for a year will earn 20,400 points by yearend.

Variety of Premiums

Based on the company's rewards scheme, this qualifies a cardholder for rewards available at the 20,000-point level, such as five free hours of AT&T longdistance calling, or one-half point off the annual percentage rate for a year.

Rewards can be redeemed at 10,000 points, 20,000, 40,000, 80,000 and 120,000. Someone who carries a $5,000 balance each month for two years qualifies for the top level. That translates into $1,200 toward the purchase of a new Honda, or two free domestic tickets on United Airlines, or two years of free AT&T long distance, or three points off the annual percentage rate for one year.

In addition, participants can achieve 10 bonus points for every dollar of AT&T long-distance calls they charge to the Universal Card.

The Universal Card comes to unsolicited customers at 9.9% over prime, or 15.9%. Others qualify for variable rates starting at 11.9%. The card carries a $20 annual fee, which is waived for the life of a card if a balance is transfered.

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