Cracking into the discount retail category, First Bank System Inc. said it will test a cobranded Visa card with Target Stores, a division of Dayton Hudson Corp.

The Target Rewards Visa will be tested in 52 stores in Florida and 31 in Indiana beginning Jan. 21.

First Bank System's vice chairman, Philip G. Heasley, was reluctant to divulge details of the program, because "our friends at Wal-Mart and others are pretty close to making a similar decision."

But he said the card would reward customers with 4% for shopping at Target Stores and 1% for general purchases. Customers will receive Target rebate checks to be spent at the discounter.

Industry sources said TJ Maxx, another national discounter, is in discussions with three or four banks, and would be the next to offer a cobranded card.

Consultant James L. Accomando was "shocked that (Target) went with cobranding, because of the newness and success of their proprietary program," which was initiated one year ago.

Target, with 673 stores in 33 states, competes with its larger rivals Wal-Mart Stores Inc. and Kmart Corp. The company serves over one million shoppers a day, it said.

The cobranded program will be rolled out nationally by midyear. Customers will be solicited through television advertising and direct mail, but the bulk of the accounts will come from in-store promotions, Mr. Heasley said.

The Visa card is viewed as a complement to the proprietary Guest card. Customers who don't qualify for the Visa may be offered the Guest card instead. In time, they could be elevated to the bank credit card.

First Bank Systems expects more than a million cardholders and $2 billion in receivables by 1998.

But to reach that lofty goal, Mr. Accomando said that the retailer will have to sacrifice some of its proprietary card customers. "It puts them in direct competition with their proprietary card, which is more profitable than a cobranded card could ever be."

Mr. Heasley said Target was more interested in increasing customer loyalty and satisfying customer demand than profiting from the card business.

But Mr. Heasley said Target attracts a solid, middle-class clientele, with plenty of creditworthy customers.

"This category of retailer ends up doing a very significant average household business."

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