slashing mileage rewards for cardholders who pay their balances in full each month. In a move across the board, the Columbus, Ohio-based credit card issuer will award only one-third of an air-mile point for each dollar of purchases charged by convenience users. All cardholders who carry a balance will continue to earn one point per dollar charged. Other changes include a standardization of annual fees and penalty rates, which for some cardholders will represent an increase. Banc One's move, which infuriated some cardholders, is the latest among card issuers to penalize their least profitable customers-those who do not revolve balances. Last September, General Electric Capital Corp. of Stamford, Conn., slapped a $25 fee on such customers, and consumer groups cried foul. Even so, industry observers predicted other card companies would follow suit. They were right: Soon afterward, European American Bank of Uniondale, N.Y., started testing a card that offers rebates to revolvers. And in January, Chicago-based Ameritech Corp offered higher rebates to cardholders who opted to forgo their grace period. John Russell, a spokesman for Banc One, said his company's policy change was a response to requests from cardholders-many of them small-business customers-to lift the annual cap on airline miles earned. The 60,000 cap was changed to an unlimited points plan, "but in order to pay for that we had to make these changes and adjustments," he said. Some customers did not view the unlimited mileage option as a boon. "Even small-business customers cannot be pleased that in order to take advantage of the higher (points) limit, they will have to pay interest," said one Banc One cardholder, who asked not to be named. "I won't use the card," he said. "I will use another card-no question about it-if they don't change the new rule." There are plenty of much better card deals for frequent fliers, he said. Edmund Mierzwinski, consumer program director of U.S. Public Interest Research Group in Washington, said banks are "tightening up on the benefits they offer to consumers as they seek to make even larger profits." "Some of what they are doing is unfair," he said. Consumer groups always make a noise when any marketer appears to diminish rewards, said Richard G. Barlow, president of Frequency Marketing Inc., in Milford, Ohio. The mileage policy change "sounds smart to me," Mr. Barlow said. "Banc One is investing more with customers that are truly profitable to them, and investing less with customers that are marginally profitable." But, Mr. Barlow added, the new fee structure is likely to mean that some of Banc One's best customers will pay higher penalties. Effective today, Banc One will levy a $25 fee on late payments and accounts over the credit limit. This represents a 25% increase. On Sept. 1, cardholders with credit limits less than $5,000 will pay an annual fee of $25. Those with limits above $5,000 will pay $55. Mr. Russell said, "It became cumbersome to have three or four different plans under one umbrella, so we customized it so everyone had the same plan." Banc One bought First USA Inc. in June; First USA Federal Savings Bank, a thrift subsidiary, now controls Banc One's card programs. First USA operates a different air mileage program-which is free for the first year, then jumps to $35 a year-but the company will accept the changes Banc One has made to its TravelPlus card, which were decided before the deal, a First USA spokesman said. First USA does not plan to change its own mileage program, he said. Card industry executives said Banc One's move may prompt other industry heavyweights to change their programs. On one hand, the issuers could try to make more money by raising rates; on the other hand, they could try to grab more market share by appealing to Banc One customers with more mileage points and lower fees. Mr. Mierzwinski said prudent card issuers should be able to reap profits without being "unfair" to their customers. "This jerking consumers around tells consumers to just get a new account," he said.

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