Back in 1981, the people at Household International still thought of General Motors in terms of cars, not credit cards. The finance company was just entering the card business by acquiring Valley National Bank of Salinas, Calif., with some 15,000 accounts.

There was no clue that 15 years later, Household would be the seventh- largest credit card issuer, largely on the strength of its marquee product, the General Motors MasterCard.

The transformation started in June 1985, when Edward G. Harshfield, then senior executive vice president of Household Financial Services in Prospect Heights, Ill., hired Joseph W. Saunders to run the card business. Mr. Saunders in turn brought in Warren S. Wilcox Jr., in early 1986, when Household Credit Services had just 50 employees in the corner of a warehouse near the Salinas airport.

"We worked in a big open space; there were lots of cubicles," Mr. Wilcox recalled. "Joe had an office in the corner and everything revolved around that. If you wanted to communicate with somebody, you just stood up and shouted, because everyone would hear you. The first one there in the morning unlocked the door and turned on the lights and made the coffee."

Mr. Saunders, 50, and Mr. Wilcox, 38, went shopping for cards. Within two years, Household had bought a $1 billion portfolio from Advanta Corp., in Horsham, Pa., where Ronald Zebeck, a former Citibank colleague of Mr. Wilcox, worked.

Their paths would cross again.

General Motors Corp. hired Mr. Zebeck in 1991 to steer the automaker into credit cards. Negotiations to create a cobranded program with Banc One Corp. faltered, because, Mr. Zebeck recalled, the bank wanted to introduce a fee-based product and he didn't. So he thought of his friends at Household.

The notion of going to a company like Household International was "a little bit of a distraction" to the GM brass, Mr. Zebeck said. "Why do I want to have a company that has a finance company mentality, versus a banking company? And the answer is, I wanted a bank with a finance company mentality so not only could I get cards to Cadillac customers, I could get cards in the hands of the Chevrolet first-time buyers as well. And that was a key to the program."

"Ron called up and said, 'Hey, I think you're the first guys I ought to talk to because I know you both,'" Mr. Wilcox said. So, in December 1991, Mr. Zebeck and a few other GM executives made a sales call on Mr. Saunders and Mr. Wilcox.

"Ron said, 'Before I say a word I want to show you a tape.'" It was a five-minute-long concept video, which contained clips of GM commercials spliced together to show how the company would showcase its credit card. "They put the tape in and we weren't more than 30 seconds into it and we knew it was the right thing for us to do," Mr. Wilcox said.

During the time leading up to the card's launch, Mr. Zebeck said, Mr. Saunders stuck his neck out for the project, in more ways than one. Much of the negotiating was done over the phone and fax, he recalled, because Mr. Saunders was recovering from neck surgery. The final contract was signed via fax, Mr. Zebeck said.

"He was willing to go to extraordinary lengths to throw capital, people, and resources into the project," Mr. Zebeck said of Mr. Saunders.

The card was launched Sept. 9, 1992, after Household and General Motors, with the help of Electronic Data Systems, built an infrastructure that could handle 300,000 applications a day.

A $40 million advertising campaign over eight weeks after the launch was so successful that Household handled 480,000 applications a day. By Oct. 7, one million accounts were opened and the first rebate had been applied to the purchase of a Buick Park Avenue in Jacksonville, Fla.

In doing so, the GM card reached the million mark faster than any other credit card in history.

Since then, the structure of the program has remained the same. The standard GM MasterCard comes without a fee and an interest rate of prime plus 10.4%. The gold product carries a $39 fee, which can be applied toward rebates. People with the gold card who maintain a balance of $2,500 or more get an interest rate of prime plus 7.4%. Cardholders earn a 5% rebate on everyday purchases plus 5% on purchases made from other retail participants in the program.

Household now claims 12 million cardholders, and says 800,000 people have redeemed rebates toward the purchase of a GM car or truck.

"It's still half of our business," Mr. Saunders said. "You can never mitigate the fact that this thing grew and grew as fast as it did. But you can't forget there's a whole other side of the business that people don't talk about that is virtually the same size."

Mr. Wilcox said Household has gone in three directions to grow to $13 billion of receivables: cobranding, portfolio acquisition, and issuing its own Visa and MasterCards.

"We haven't blindly adhered to one of the three," Mr. Wilcox added. "We've been smart enough to know which lever to pull and when. You end up with a business that's pretty diverse. That may be what makes us different; that nimbleness and flexibility has been a key to our success."

Last year, Household pulled the acquisition lever twice and the cobranding lever once. It acquired the $125 million US West card portfolio, made up of 250,000 accounts from U.S. Bancorp. Prior to that investment, it had taken over US West's 2,500-card small-business program. To round out its acquisitions for the year, it bought a 282,000-account, $450 million portfolio from National Westminster.

And in an unusual twist, Household in December blazed a trail in cobranding by signing a deal to issue a MasterCard corporate card with Carlson Wagonlit Travel, the second-largest travel agency in the world.

Household said it would compete with American Express, which leads the corporate card market. "All of a sudden you have an interesting proposition," said Michael J. Freudenstein, an analyst with J.P. Morgan Securities Inc., who said bank card issuers used to have trouble going head to head with American Express.

Then, in February, Household won an endorsement from the AFL-CIO's executive council for the purchase of about $2.5 billion in receivables. Bank of New York's 10-year contract for the affinity program will expire next year. Household has offered the union a deal guaranteeing it $375 million over five years, an offer Bank of New York has the option to match.

Although Household is excited about the prospect of taking over the program, the executives remain cautious. "It would be vastly premature to suggest it will wind up in our lap," Mr. Saunders said.

"It is a great opportunity for them to pick up a high-quality portfolio," Mr. Freudenstein said. The credit card quality in the AFL-CIO is strong, he said, because of "hardworking people, who borrow money and pay it back."

Household said it would offer the Union Privilege, a MasterCard product, with no fee and with a variable rate of 13.5% and no grace period. It also plans to offer a secured card, as well as one that offers a grace period.

The union reportedly believes Household would approve more of its members for cards than Bank of New York because of superior modeling capabilities. There are two million Union Privilege cardholders out of 13 million members. In fact, Mr. Wilcox said, those members are "right in the sweet spot of Household's corporate target market."

Household may have yet another cobranding opportunity in regional Bells. Household already issues cards for Ameritech, with 800,000 accounts, and Pacific Bell, with 180,000. If the proposed SBC Telecommunications-Pactel merger goes through, analysts are saying, Household may bid for the SBC cobranded program, currently run by Mercantile Bank of St. Louis.

For additional opportunities, Household has to look no further than to Household Retail Services, which issues private-label cards for Mitsubishi Consumer Electronics, Amana Heating and Air Conditioning, and Art Van Furniture. With $3 billion in receivables at yearend, Household Retail Services was the second-largest third-party issuer in the United States, the company said.

Mr. Saunders and Mr. Wilcox confirmed they are testing a conversion of private-label programs to cobranded MasterCard or Visa cards, but refused to say with which retailer. "There's a substantial amount of synergy on the processing side of the business," Mr. Saunders said, noting that the processing, servicing, and collecting are done together.

Any discussion of Household has to include its overseas ventures. Mr. Saunders, who is the chairman of the MasterCard International board, frequently chats with MasterCard's president, H. Eugene Lockhart, and also keeps abreast of Household's presence abroad.

Household operates private-label programs in Canada and is considering issuing a cobranded product with a major Canadian retailer. In Mexico, it runs the United Airlines MasterCard and Visa program. In the United Kingdom, Household issues the cobranded card for Vauxhall, a GM affiliate, and it issues the Toys "R" Us and Sun Newspaper cards.

"There is no credit card market in the world that is as prolific as the one in the United States," Mr. Saunders said. "There are some that we hope will become more so."

And there are few products that will be as lucrative in the United States as the GM card has been. Four years into it, Household has grown to 4,000 employees in three locations, largely because of the GM card. The two companies are committed to a long-term relationship that will carry them into the next century.

"I don't think anybody can pick anything that's going to be as big as GM was, the way it was," Mr. Saunders said. "There are very few items that on average cost more than $20,000, that people buy multiple times in their life."

Mr. Zebeck said, "I think the GM card has been an enabler for them to demonstrate to themselves that no program is too big, no program is too difficult."

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