General Electric Co.'s credit card bank on Friday announced major changes in its rebate program, underscoring recent indications of a new competitive phase for the card business.

Moving to reduce confusion and give more explicit cash incentives, the sponsor of the GE Rewards MasterCard said it would stop giving loyal card-holders checks that could be used only in stores that agreed to participate in the program.

In line with other companies that have adopted the rebate approach, GE in June will begin paying cash bonuses that card-holders can use anywhere.

GE Capital Consumer Card Co. thus became the fourth major issuer this month of so-called value-added credit cards to announce a significant marketing initiative or enhancement.

One Up on Discover

Just last Thursday, Chase Manhattan Bank introduced its CashBuilder Visa, which one-ups the Discover Card and others by basing rebates on both purchases and interest payments. (See article on page 16.)

The timing is not coincidental, according to Robert McKinley of RAM Research Corp., Frederick, Md. The announcements come before summer, which is a slow time for signing new accounts but second to the Christmas season in credit card spending.

GE, the 14th-largest bank credit card issuer according to The Nilson Report, will issue its last rebate checks in July. They will expire in September. The checks, for specific stores, amounted to $10 for every $500 spent.

Cash on the Barrelhead

The company will now give more straightforward cash rebates of up to 2% annually on purchases of up to $10,000.

"We began with a strong product concept," said Daniel DeMeo, marketing manager of GE Capital Consumer Financial Services in Stamford, Conn. "And we have continued to respond to changing consumer lifestyle and spending patterns."

The GE Rewards card has been evolving since it was introduced in September 1992. Early on, its $25 annual fee and 18.4% interest rate were criticized for being uncompetitive.

Last year, the card-issuing bank owned by GE Capital Corp. dropped the annual fee and began offering tiered interest rates, with the more credit-worthy customers paying less than others. GE is eliminating the tiering of rates for new customers.

The newly announced features "should help to streamline the program," said Michael J. Auriemma of Auriemma Consulting Group Inc. in Westbury, N.Y.

Complex Conditions

"The card was difficult to explain," Mr. Auriemma said. "It wasn't cash, but checks with partners, and you had to understand first who the partners were before you could agree to accept the card."

GE will be providing tiered rewards. Consumers can earn a 0.5% cash rebate for up to $2,000 of spending, and 1% for spending between $2,001 and $4,000. The highest rebate is 2% rebate for spending between $6,001 and $10,000.

By contrast, the Discover product of Dean Witter, Discover & Co. offers a tiered cash rebate reward beginning at 0.25% for $1,000 in spending, and caping at 1% for $3,000 in spending.

Mr. DeMeo said the revisions are not a swipe at the Discover card but rather "a response to our own consumers."

For the past six months, GE Capital did test-marketing with 10,000 of its 1.5 million card-holders. It found that the program with its new features out-performed the old one.

New Partners Announced

GE also announced 11 new partners for the program, bringing the total to 41. The partners will continue to send card-holders a quarterly booklet of discount coupons. With the elimination of the $10 rebate checks, Mr. DeMeo said, the partners will have more flexibility to offer special promotions.

Performance-Based Pricing

"They were limited -- they didn't know when or where the consumer would redeem the checks," said Mr. DeMeo, who added that now the partners could devise their own ways to encourage consumers to spend their rebate cash in their stores.

The GE Rewards program will also offer its lowest rate, prime plus 8.9%, or 15.65%, to all new customers. Current holders of cards priced at 18.9%, the highest rate charged, can move to the lower rate with a good performance record. In effect, the tiered pricing has been eliminated for all new accounts.

"The critical link for GE will be how it communicates the new terms to the public," said Mr. Auriemma.

Besides GE Rewards and Chase CashBuilder, the programs announced in recent days were the Edvance MasterCard from Advanta Corp., which offers benefits in the form of savings bonds that are tax-free if used for education; and a revamped AT&T Universal card, rewarding consumers who carry a balance with rebates redeemable at a number of partners.

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