Household will issue cobranded Visa card for Charles Schwab.

Household Bank is developing a cobranded Visa card for Charles Schwab Corp., the discount brokerage with 2.5 million customers.

The unit of Household International Inc. has already issued a relative handful of cards to Schwab clients who had held affinity cards issued by Bank America Corp.'s Seafirst subsidiary.

Schwab officials said the new card, offered to fewer than 50,000 people, is an interim step toward a higher-profile product launch scheduled for January. The San Francisco-based brokerage is counting on Household to come up with a package of benefits and terms that will have some of the impact of the credit card bank's other cobranding programs.

GM Blockbuster

The Household International unit's General Motors MasterCard obliterated credit card growth records in the past year, luring millions of customers with rebates on vehicle purchases as well as balance-transfer incentives, below-average interest rates, and no annual fee.

The automaker claims some 80,000 consumers have applied their card rebates toward GM vehicle purchases,

Schwab won't shake the world the way GM did. But it does give Household another opportunity to increase its accounts. And with the card, Schwab can compete more aggressively - to some extent against banks - as a one-stop purveyor of financial services.

The interim card breaks no new ground in pricing and benefits, however. Robert B. McKinley, president of RAM Research Corp. in Frederick, Md., said that given the keen level of competition, the typical Schwab client could probably qualify for more favorable terms from a number of banks.

Annual Fee After First Year

For the first year, the current Schwab offer is no annual fee and an interest rate of 11.9%. After that, a $30 fee and a rate of prime plus 8.9%, or 14.9%, take effect. Cardholders are also entitled to a free subscription to one of the major financial magazines - Business Week, Forbes, Fortune, or Money.

Emory Winship, vice president of product development at Schwab, described the initiative as "a way to welcome back" cardholders from the expired Seafirst program. But he emphasized that more competitive benefits could be in the package next year.

"We hope to come to market with a credit card that is attractive to our customers," he said. "The credit card business is a very aggressive business. What's attractive changes day by day."

He said Schwab chose Household because of its success in joint marketing ventures with GM and Ameritech, the Illinois telephone company for which Household issues the "Complete" calling and credit card.

Mr. Winship also cited the bank's customer service capabilities, fraud control technology, and direct marketing expertise.

The interim card is being offered only as a Visa. Mr. Winship said both the Visa and MasterCard brands will be offered in the full-scale program next year.

Key Federal Savings Bank of Owings Mills, Md., will drop the rate on its secured credit card to 18.9% from 21.99% on Jan. 3.

The move was made possible by the thrift's acquisition last month of a branch in Rehoboth Beach, Del., where it is moving its card issuing operation.

Delaware's credit card law, unlike Maryland's, allows fees to be charged when cardholders exceed their credit limits. Key Federal says the ability to charge an over-limit fee - it will be $15 - allows it to lower the interest rate while covering the expenses of collecting payments and issuing notices to merchants not to accept the cards.

Previously, these costs were factored into the rate, said Robert M. Bouza, president of Key Federal's card unit. "Now, we can segregate. Everyone gets a lower rate, and only those who abuse the system pay," he said.

Key Federal was a pioneer of secured cards, which require a deposit as collateral for the credit line. The cards appeal to people who need to establish or restore a credit rating.

Key Federal provides credit lines up to 25% higher than the savings deposit, and gives cardholders the opportunity to convert to an unsecured card with a 16.9% rate after two years of regular payments. The program currently has 55,000 secured accounts.

Citizens Bank of Rhode Island has joined the swelling ranks of banks offering an aggressive incentive to transfer balances from other card issuers.

The Citizens Financial Group unit will charge an annual rate of 8.9% on its no-annual-fee Visa card for balance transfers and cash advances until March 31, 1994. That rate will be in effect until those balances are paid.

A fixed rate of 13.9% will apply to new purchases and all charges made after the introductory period.

Although the bank has 99 branches in southern New England, the reduced rate is being promoted solely in Massachusetts.

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