With the competition heating up, Banco Popular de Puerto Rico, San Juan, is preparing to defend its position as the island's largest issuer of credit cards.

The $13 million-asset bank introduced the Premia credit card, which rewards customers with points redeemable for merchandise or cash rebates.

What is commonplace on the mainland, like cobranded credit cards and rebate programs, is rarely seen in Puerto Rico, said Marina Ramirez, product manager of the Premia card.

But that seems to be changing, she said. Price competition is increasing, with more banks offering balance transfer offers, eliminating annual fees, and offering introductory interest rates.

Banco Popular settled on an enhanced credit card, because it did not want to enter a price war, said Ms. Ramirez.

"The Premia card jumps over the price competition to offer consumers more value," she said.

Only a handful of banks in Puerto Rico are selling more than plain- vanilla cards, including Citibank, which issues the Advantage card there, and Banco Popular, which also issues a supermarket credit card.

Banco Popular controls 45% of the card market, with $300 million receivables, while Citibank, the second-largest player, controls about 25% of the business. Puerto Rico's total population is approximately 3.5 million.

Ms. Ramirez believes that other mainland issuers, possibly First USA and MBNA Corp., are also interested in entering the Puerto Rican card market.

Banco Popular launched the Premia card in part to protect its leading position, said Ms. Ramirez.

The program, which offers cardholders a wide variety of merchandise, ranging from jewelry and household appliances to airline tickets, is being administered by a mainland company, which Ms. Ramirez declined to name.

"No other card that offers rewards presently in the Puerto Rico market allows the customer to choose among merchandise, airline tickets, and cash rebates as the Premia card," said Richard L. Carrion, president and chief executive of Banco Popular, in a release.

Cardholders earn one point for every dollar they charge on the Premia card, redeeming the points for cash or merchandise when 5,000 have been accumulated. Airline tickets require 10,000 points.

Instead of offering a teaser rate, Banco Popular is giving cardholders 1,000 complimentary points for requesting the Premia card. The interest rate is 16.95% and there is a $45 annual fee.

By contrast, Banco Popular's standard credit card carries a $24 annual fee and 16.95% interest rate.

There are no retail partners participating in the Premia program, since the merchandise is selected from a catalogue, but Ms. Ramirez said that Banco Popular may consider offering double points in the future.

Banco Popular issues credit cards only in Puerto Rico, but it has branches in New York, Chicago, and Los Angeles, where it targets primarily the Hispanic communities.

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