When GE Capital Corp. rolled out a "revolutionary" MasterCard program on Sept. 2, bankers braced for stiff competition from another nonbank invader.

Two months later, some of the fear has lifted.

GE Rewards has an above-average annual percentage rate of 18.4% and a $25 annual fee - terms that seem especially harsh as other credit card issuers make headlines by slashing rates.

Interest Rate Criticized

The pricing "was really out of step," said Robert McKinley, president of RAM Research USA.

David R. Nissen, chairman of GE Capital Consumer Financial Services, is quick to defend the new card. "People like to point to 12% cards and compare us against them," he said. But those programs are elitist."

Mr. Nissen, whose company advertises its card as a "revolutionary" product, said his competitors are offering their best rates only to their most-creditworthy consumers.

No other program, he adds, can compete with his card's "partner" plan. Each year, GE Rewards cardholders receive $600 worth of coupons good at 24 retailers, including Macy's, Toys |R' Us, and K mart.

"We're trying to generate a program for the masses," he said.

Nonbelievers

But skeptics abound.

"The market is demanding more competitive interest rates and fees," said Mr. McKinley of RAM Research.

The marketing plan by GE Capital, a unit of General Electric Co., also has been scored.

The diversified manufacturer announced Ge Rewards one week before General Motors unleashed its GM Card. Priced at 15.9% with no annual fee, it attracted one million accounts in its first four weeks.

Mr. Nissen will not say how many consumers hold the GE MasterCard. but he scoffs at the idea that GM took the steam out of his product.

Moreover, he says that his product is more precisely targeted at consumers who are customers of the 24 mass-market retailers in the GE program.

In addition to the discount coupons, GE cardholders receive $10 of "reward" checks that can be used at the retailers for every $500 they spend.

"With good execution, this should be a home run program," said Donald Auriemma, president of Auriemma Consulting.

Testing Different Approaches

But to date, execution has been wanting. Unlike GM, which has been blitzing the national airwaves with commercials, GE Capital is operating in test mode, with television ads running in only five markets.

Different mailing and pricing approaches are still being tested.

GE also suffered by announcing its plans before marketing literature was ready. Many people who called a toll-free number for an application when the card was announced two months ago received card applications only this week.

The rewards formula also can be confusing. Consumers are asked to distinguish the merits of "rewards checks" for use at select retailers from $150 of "savings certificates" that will come each quarter from each retail partner. They further get pitches for "bonus rewards" for switching to Sprint or signing up with Home Box Office.

Situation Analyzed

Why all the marketing kinks?

GE Capital, according to several sources, launched the card before its time. GE Capital was weeks away from taking the wraps off the program when its parent pushed for a premature launch. The reason: Nervous investors were reading advance reports about the card in the advertising press.

GE's search for an ad agency led to a flurry of reports in August about the company's ambitious plans. Investors worried that GE was overspending.

A press conference was hurriedly scheduled in late August for Tuesday, Sept. 2.

"It wasn't very consumer-friendly," said one source who attended. Executives failed, he said, to clearly explain the card's basic benefit - that holders get $600 of savings certificates each year from 24 retailers.

Marketing Efforts Noted

Mr. Nissen said the confusion is overstated, adding that GE has a sophisticated marketing plan.

For example, it recently mailed five million solicitations to test various pricing scenarios - including one that offers the card at no annual fee to "select" consumers.

Some consumers are also being issued the card with a 14.9% annual percentage rate, he said.

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