Two regional companies are teaming up to offer consumers discounts on groceries with a cobranded credit card.

M&T Bank, Buffalo, will be issuing the Tops Friendly Markets Visa card, which offers consumers a 2% rebate on all purchases made with the card, awarded annually and redeemable at any Tops location.

Tops, also based in Buffalo, owns 62 supermarkets, 88 Wilson Farms convenience stores, which don't take plastic, and nine Vix discount drug stores, located throughout western New York State and northern Pennsylvania.

Dan Shanahan, vice president for point of sale at Tops, said 1.5 million customers visit the supermarkets each week, and credit cards are the fastest-growing payment form. "We have some stores with as much as 20% of payments on cards," he said.

M&T, the $8.8 billion-asset subsidiary of First Empire State Corp., serves several upstate New York markets. The bank has 130,000 card accounts with $150 million in outstandings.

M&T will be entering the cobranded arena with this card. "We expect it to be very big," said Bill Mabee, administrative vice president and credit card business manager. "We're launching with television, take-ones, and heavy in-store merchandising."

But in a high-rate environment, the card, which has a 9.9% over prime interest rate on its classic version, as well as a $20 fee after the first year, may not be such a good deal for consumers, said Robert McKinley, president of RAM Research, a card tracking firm in Frederick, Md.

While it offers the usual teaser period, with a fixed 8.9% rate until October and no fee for the first year, it may not be enough to lure consumers, who are inundated with offers.

Quality Markets, part of the Penn Traffic Co. family of food retailers, competes in the same upstate New York area, and offers consumers the same deal on a cobranded card, except rebates are awarded every time the customer reaches $500 in spending, with no cap. Tops Visa limits rebates to $500.

Mr. Mabee said the Tops card was in the making at least six months before the Quality Markets MasterCard hit the scene. "You can walk in Quality Market and won't see evidence of the card that you will see when you walk in a Tops store," he said. "We're taking a more high-profile approach."

Mr. McKinley said it's "not good marketing to throw out a high-rate card" at a time when consumers are more concerned with decreasing debt. "Fees are a no-no too."

Mr. Mabee said the bank would be comfortable attracting 20,000 cardholders in the first year, but Mr. Shanahan said he's hoping for 50,000 to 75,000 in the first four months. "I'm not going to be happy with 20,000, because we're doing that much now (with other cards) and this is a better deal for the customer."

He noted that rebate cards are popular with consumers and compared the Tops Visa interest rate with other high-profile cobranded programs such as AT&T and General Motors, which both carry higher interest rates.

Even so, Mr. McKinley pointed out that when those cards were first issued, the prime rate was only 6%, giving the cards a favorable variable rate for customers, as well as no fee for life.

Mr. Shanahan remains optimistic. "We saw the trends; people love these cards," he said. "We're just jumping on the wave and giving them a better card."

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