First NH Bank is joining the growing number of small banks that are turning a profit by encouraging loyalty to a local community.

Consumers are urged to sign up for the new NH Bank credit card because it allows them to support the 400 public schools in the state.

Spending on the card as well as balance transfers are rewarded with a 0.05% donation to the school of the cardholder's choice.

The Manchester, N.H., bank is also sweetening its offer with an introductory rate of 9.49% for people who transfer a balance.

First NH is not the first bank to link credit card spending to education.

Colleges and universities have offered so-called affinity credit cards for a number of years, but the idea of drawing on an entire community or residents of a state to support local schools and commerce appears to be a new trend in the credit card industry.

Colleges and universities traditionally target alumni or current students, rather than the general public, for their card product.

A school board in Worcester, Mass., teamed up with Commerce Bank and Trust Co. to introduce a credit card that helps fund a variety of programs in the local school district.

A portion of the cardholders' spending is donated to the school in addition to part of the annual fee.

Similarly, the municipality of South Orange, N.J. plans to launch a credit card, of which a portion of the interest fees and spending would go toward a redevelopment fund that would help local merchants acquire loans or grants. Also a portion of the fund will be earmarked to refurbish downtown South Orange.

These programs are designed to tug at the strings of consumers' pride in and or Ioyalty to their community.

"Only 30% of Granite Staters carry a credit card from a local, New Hampshire-based financial institution," said James Melia, senior vice president of retail lending for First NH Bank.

"Our new education card program will give New Hampshire consumers a compelling reason to select a credit card which gives them the opportunity to help the children of our state."

First NH Bank expects its credit card to provide the school system with $1 million before the class of 2000 graduates.

The $3.5 billion-asset bank is also testing a sort of finder's fee that would give the school an extra reward for each new cardholder brought into the program, either through a school or local PTA promotion.

A spokesman for the bank said that a number of schools will begin testing their hawking skills in the coming weeks.

In addition, a marketing campaign is planned that will include direct mail, newspaper, and broadcast advertising.

Within the next two years First NH hopes to attract 50,000 new customers, which would significantly boost its $65 million card portfolio.

There are two versions of the New Hampshire card. Customers can apply for a card with no annual fee or grace period and an interest rate of 14.9%; another offer waives the $20 annual fee in the first year, provides a 25-day grace period, and charges an interest rate of 16.15%.

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