Credit card loans grew far more slowly in 1996 and the first half of 1997 than in the two prior years, according to the American Bankers Association.

In 1996, credit card outstandings grew 14.3%, to $366 billion, said the ABA's annual report on the card industry. That's off sharply from 24.9% in 1995 and 30% in 1994.

Quarter-to-quarter results for the beginning of 1997 showed continued slow growth. In the first quarter, card loans actually declined, to $359 billion, which the ABA said was normal after the holiday season. But they rose again by the middle of last year, to $367 billion.

The ABA said the slower growth was evidence that banks had adjusted their underwriting in the face of losses.

Of the 95 card-issuing banks surveyed, 80% said they had tightened loan standards and only about 10% said they had eased them.

"It's not that they are not extending new credit," said ABA associate director Jane Yao. "It is just that they are more careful.

"Marketing activity decreased substantially because of the concern about losses," she said. "The measures that banks put into place are showing."

Ms. Yao said the proportion of credit card accounts carrying balances from month to month decreased in 1996. That year, 36% of accounts were paid off monthly, up from 30% in 1995.

"Banks have done a more aggressive job of trying to control their credit card portfolios," said Sung Won Sohn, senior vice president and chief economist of Norwest Corp., Minneapolis.

"Some banks have stopped soliciting credit card applications at discount stores, because delinquency rates from those applications turned out to be much higher than the rest," he said.

The ABA Bank Card Industry Survey includes trend information and figures from banks, Visa U.S.A., and MasterCard International. The report covers 1996 in detail and contains substantial information about the first half of 1997.

The survey showed that in 1996, the average cost to maintain a credit card account was $40.55. The largest expense was operations ($13.18), followed by collections ($8.67), marketing ($7.87), and customer service ($6.22).

The survey also described differences in how larger and smaller card issuers derive revenue. The 10 largest banks in the survey-with more than $750 million in card outstandings-got 70% of their revenue in the form of interest, 12% from interchange fees, and 2% from annual fees.

Among the 11 issuers with $50 million to $749 million in receivables, 50% of the revenue came from interest, 23% from interchange, and 7% from annual fees.

"The larger issuers could be participating in revenue-sharing with their cobranded and affinity card partners, which reduces their interchange income," said Stanley W. Anderson, president of Anderson & Associates in Arvada, Colo.

He said cardholder spending patterns also might not be generating significant interchange income for their banks.

Gary Gordon, a PaineWebber Inc. analyst, said interest would always be the biggest source of card-issuer income. But "other fees, such as late and over-the-limit charges, have started to rise materially."

These "other fees" rose to 16% of total revenue in 1996 from 7% in 1995 at the larger banks in the survey, and to 20% from 8% at the second-tier banks.

All those surveyed said they offered teaser rates to customers, but these seem to be falling out of favor. In 1996 the banks signed up only 185,472 of those accounts, down sharply from 648,550 in 1995.

Cobranding, on the other hand, seems to be undergoing a resurgence. Larger issuing banks increased their cobranded accounts to 60% of their total portfolio in 1996. In 1995, they accounted for 29%, and in 1994 a mere 10%.

The mid-tier issuers had a similar experience. Their cobranded balances increased 45% in 1996.

Cobranded programs "are a natural evolution in terms of market expansion," Mr. Anderson said. "Oftentimes in cobranding, there is a defined data base to work from, which is much less costly than direct mail or telephone solicitations."

One survey area where the largest issuers came out ahead of their smaller rivals in 1996 was customer service. The bigger banks answered customer telephone calls in 23 seconds, versus 32 seconds by the smaller banks.

And an average of 7.8% of smaller banks' customers hung up before waiting for an answer; only 3.7% did at larger issuers, which presumably had more efficient call centers.

"Service levels may have slipped a bit because banks are trying to cope with an increase in accounts," Ms. Yao said.

In other findings, lost and stolen cards were the largest contributor to fraud losses, accounting for 70%. Also playing a part were mail or phone order fraud (9%), mail interception (8%), fraudulent applications (7%), and counterfeiting (7%).

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