Growing acceptance of credit cards by merchants and effective marketing strategies by card issuers have led some analysts to upgrade their forecast for the industry.

"Our thinking was that account growth in terms of outstanding balances and new customers would slow by now, but there are no signs showing that yet," said Moshe Orenbuch, who follows some credit card specialists for Sanford C. Bernstein & Co. "Low [rates] have been explosively popular, and aggressive marketing has boosted overall growth," he said

Mr. Orenbuch, who spoke at the American Bankers Association bank card conference in Washington last week, said he and his colleagues at Bernstein now expect charge volume to grow 10% to 11% annually. In a comprehensive report on the industry issued in January, he and fellow banking analysts Guy Moskowski and Ronald I. Mandle had forecast 9% annual growth.

Low-Rate Segment

The analysts say they may have underestimated the success of the low-rate segment -- including such issuers as MBNA Corp., First USA Inc., and Advanta Corp. -- because market interest rates stayed low longer than they expected.

The report suggested that long-term growth would hinge on continuing penetration into untapped markets such as grocery, stores, fast food outlets, and government agencies.

General-purpose cards, which account for 10% of all consumer payments, will add 20 to 30 basis points per year to their share over the next five years the analysts said. That is half the historical rate for credit cards, but Mr. Orenbuch pointed out that it exceeds the growth rate in many banking businesses.

While debit cards are likely to capture a large portion of some of the newer markets such as grocery stores, Mr. Orenbuch said that credit cards will gain as well. Each additional 1% penetration of these categories would add 3% to industry growth, he estimated.

"The credit card industry is among the fastest-growing businesses available to banks and one of the best in the entire financial services industry," Mr. Orenbuch said.

Another Wall street analyst, Samuel G. Liss, director of U.S. equity research for Salomon Brothers, also was impressed.

"The credit card arena is clearly in a growth mode," he said during a panel discussion at the American Financial Services Association convention in Boston. The rest of the consumer finance industry could "take lessons from the marketing and segmentation efforts by credit card issuers."

But participants in the panel discussion also warned that profit margins could decrease as more and more lenders try to mimic the segmented marketing method, which has allowed issuers to add accounts by custom-designing cards for small groups of consumers.

Mickey Meece contributed to this article.

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