After a five-year hiatus, Bank of Boston Corp. is getting back into the credit card business with low-rate cards targeted at consumers who carry balances.

The $45.3 billion-asset banking company began offering the MasterCards and Visas last week. For the first six months, the cards carry a 6.9% rate, or 1.85% below prime, which jumps to 3.75% above prime, now 12.50%.

While Bank of Boston is plunging in with an aggressive offer, Salomon Brothers analyst Thomas P. Facciola pointed out that it will have a low profit margin. "In this environment it will be tough to regrow that business," he said.

On the other hand, Mr. Facciola pointed out that by starting from scratch, Bank of Boston avoids the problem of repricing older accounts in order to retain them. In 1990, Bank of Boston sold its $625 million credit card portfolio to Chase Manhattan, entering into a noncompete agreement that is ending at the end of this year.

Now that it has reentered the competitive market, Bank of Boston has set its sights on customers from People's Bank and Fleet Financial Group Inc., which dominate the New England card market.

Bank of Boston said it plans to undercut them in pricing and surpass them in managed loans within three years. Beginning next month the bank will also test the national market.

"We don't want to take on Citibank," said Jeff Slawsky, director of credit card services, who joined Bank of Boston 10 months ago from Banc One Corp. to start up the credit card program. "But we do want to be the largest New England based issuer."

Bridgeport, Conn.-based People's Bank is the 28th-largest card issuer with $1.7 billion in managed receivables, and Fleet, based in Providence, R.I., is ranked 30th at $1.6 billion, according to The Nilson Report's midyear rankings.

Jack Curry, vice president of credit card marketing for People's Bank, is skeptical about his competitor's strategy and goals. "I am not so certain that consumers are focusing on the permanent rate as much as we would like them to," he said.

Resisting the trend away from annual fees, Bank of Boston is charging $18 with a twist. The bank guarantees that it will return the $18 if a customer who transfers a balance finds after one year that the bank's lower interest rate was not cost effective compared to what the customer would have paid at the previous bank.

Mr. Slawsky believes that this guarantee, and the bank's low interest rate, will "break through the numbness" consumers feel about the dozens of credit card offers they receive.

While the initial product is price oriented, Mr. Slawsky said, Bank of Boston might consider other value offers, similar to Mellon Bank's Cornerstone card, which rebates interest charges over a period of time.

"A big part of what we are doing is building a data base," he said, "and we hope to learn (from the data base) what other products we should offer."

Bank of Boston also expects to increase its automated teller machine reach in New England by installing 86 terminals by yearend in such locations as McDonald's, Wal-Mart, and supermarkets. The bank recently reached agreements with Cumberland Farms, Walgreens, and Anne & Hope to install ATMs in their stores.

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