First USA Bank and Waldenbooks have introduced a credit card that offers gift certificates on books.

The Visa card, which has no annual fee, offers a 5.9% introductory annual percentage rate through Nov. 1, when it becomes prime plus 7.9%. Although it comes in a standard version, the credit line starts at $5,000, going to $10,000 with a balance transfer.

Cardholders earn one point for every dollar spent at Waldenbooks using the Waldenbooks Preferred Reader Visa. Points are also earned when other credit card balances are transferred to the Waldenbooks card, the company said.

"For avid readers, this is an excellent credit card value," said Christopher J. Peluso, vice president of marketing for Borders Group Inc., of which Waldenbooks is a wholly owned subsidiary. Companies belonging to Borders, based in Ann Arbor, Mich., deal in retail books, music, and other informational and entertainment products.

The incentive program is structured so that Waldenbooks purchases are rewarded more than out-of-store buys such as clothing, dining, and travel, the company said.

For every 100 points they earn on Waldenbooks sends cardholders a $5 certificate which can be used toward purchases at any of the bookseller's 1,000 stores.

Preferred Reader Visa cardholders earn one point for each $5 spent at stores other than Waldenbooks.

"We see cobranding as a segmentation strategy," said Francine B. Schall, senior vice president for Visa U.S.A. "It's a way to put valued products in the hands of consumers. A card that gives them personal value which, in this case, involves discounts, is extremely attractive."

This is not the first time that Waldenbooks has used a credit card company to advance its market standing. In September 1992, Waldenbooks was one of about two dozen retail and service companies - including Macy's, Kmart, Hertz, and HBO-Cinemax - to join GE Capital Corp. and MasterCard's GE Rewards program, which provides rebates to cardholders.

GE Rewards has proven to be successful, more than doubling its household penetration last year. This gain was attributed to a simplified rebate structure and the elimination of its annual fee.

A Waldenbooks spokesman could not say if the company still participated in GE Rewards, but Tony Zender, a spokesman for GE Capital, said Waldenbooks was still on board.

Industry observers don't see how Waldenbooks can lose in instituting such a cut-and-dried promotion as the new First USA Visa card.

"This can be profitable even with a small card base," said David Robertson, president of The Nilson Report, a credit card industry newsletter based in Oxnard, Calif. "It's not going to be a blockbuster, but it doesn't have to be.

"bookstores are growing very quickly, which is in direct opposition to what we've been hearing about growing on-line activity," he continued. "Lots of people are enthusiastic about books. Waldenbooks wants to differentiate itself from competitors such as Barnes & Noble."

The company launched its Preferred Reader program in 1990 which, in addition to offering special savings, gives members targeted mailings highlighting new products.

First USA Bank had issued 9.5 million credit cards with $12 billion in managed loans outstanding at March 31. The bank is reportedly looking into a variety of cobranding and affinity partnerships.

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