Chase Puts Marketing Might Behind Visa Debit Program
NEW YORK -- Chase Manhattan Bank has become the first major New York institution to aggressively market an enhanced version of its automated teller machine card that can be used for purchases from millions of merchants worldwide.
Last week, the bank began mailing an offer to 100,000 checking account customers for its Visa Debit card, dubbed the Money Card, which is usable as a "plastic check."
Customers will be able to use the Money Card to pay for goods and services from any merchant that accepts Visa credit cards. The payments will be deducted directly from the cardholders' checking accounts.
"We want to increase the ease [with] which our customers can access Chase," said Barbara Velte, a Chase vice president.
The unit of Chase Manhattan Corp. has been aligned with Visa Debit for 11 years but has not promoted the program in the past. The bank declined to say how many Money Cards it has issued.
Plans for Rollout
The bank plans to roll out the Money Card to "as much of our checking account base as possible," said a bank spokesman, who declined to be more specific.
Chase had 810,000 ATM cards outstanding at the end of 1990, representing 600,000 retail banking accounts, according to Credit Card Management, an industry publication of Faulkner & Gary Inc., New York. If all its ATM cards were converted to Money Cards, Chase's point-of-sale debit card program would become one of the nation's largest.
Many institutions that enroll in Visa Debit, and its counterpart at MasterCard International, MasterDebit, allow only their most creditworthy clients to carry the enhanced debit cards. Because the systems are not fully on-line, the movement of funds from consumer to retailer is delayed when a purchase is made, meaning sufficient funds may not be available to cover the debit.
Criteria for Cards
Chase executives suggested that a large percentage of their customer base will qualify for the card. "We'll use the same criteria we use for our checking accounts and look at how they take care of their credit obligations," said Ms. Velte.
For Chase, Visa Debit is seen as a way to distinguish its checking account from those offered by its money-center competitors. In addition to functioning as a point-of-sale debit card, the Money Card will be good for cash withdrawals from the Chase, NYCE, Plus, and Visa ATM networks at a total of 100,000 locations worldwide.
The program will also be a source of revenue for Chase. As with credit cards, banks get about 1% to 2% of each sale completed with a Visa Debit or MasterDebit card they have issued.
Fee Income Projected
Some institutions also reap income from the cards in the form of annual fees. During 1991, Chase will issue the card for free. In 1992, cardholders will pay $1.25 a month should they fail to maintain minimum balances ranging from $3,000 to $5,000, depending on type of account.
While popular in the West and in some areas of the South and Midwest, point-of-sale debit cards are relatively new in the Northeast. First Interstate Bank of Oregon, NCNB Corp., First Chicago Corp., and First Bank System Inc. are among the institutions aligned with Visa Debit.
MasterDebit has Fleet/Norstar Financial Group Inc. and NBD Bancorp on its bank roster.
Dime Savings a Pioneer
Before Chase's big mailing, Dime Savings Bank had been one of the only institutions in the New York area to market a Visa Debit card.
Industry observers expect consumer purchases of goods and services with debit cards to increase dramatically in the next 10 years. Speer & Associates Inc., an Atlanta research firm, projects that monthly debit transactions at the point of sale will climb to 4.06 million this year from 2.90 million in 1990.
In addition to the MasterDebit and Visa Debit programs, several regional electronic funds transfer networks offer what are known as direct-debit point-of-sale systems. With these systems, creditworthiness is not an issue, as funds are immediately transferred from the customer's account to the merchant's
New York's regional network, NYCE, began offering such a system last year.