AT&T Universal Card Services Corp. and American Express Co. are upping the ante in the competitive college market segment just as the new school year is beginning.
Without media fanfare, in August, American Express began marketing its revolving credit Optima card to college students, offering them discount coupons that can be used on Continental Airlines. And last week, AT&T announced a similar offer with USAir.
The idea of luring students with discounted airline tickets is not necessarily new. Both companies have been marketing card products to college students for years - American Express since 1978 and AT&T since 1993.
But industry observers say the companies' offers are particularly aggressive because cardholders get coupons throughout the life of the card as opposed to a one-time benefit to get people to sign up.
"Marketing to college students is more sophisticated now," said Eric Weil, who is publisher of a newsletter called Collegiate Trends. "The focus is on retention rather than acquisition."
AT&T mails three USAir certificates to its student cardholders every six months, and American Express sends out five Continental Airlines coupons per year, two of which are for companion tickets.
American Express' alliance with Continental, which issues a cobranded credit card with Marine Midland Bank, is not new.
For several years, American Express has offered discounts to college students who have its green flagship charge card and fly on Continental Airlines. And in the 1980s, the New York-based card giant had a similar program with Northwest Airlines. The latter program was discontinued and did not continuously distribute coupons.
AT&T's coupons are being offered to new and existing cardholders. Its college card differs from the standard Universal card in several ways. It comes with credit education material and a purchase protection program that protects items up to four years against accidental damage or theft.
Credit lines on the Universal card are generally smaller, and student cardholders are warned by the issuer when they approach their limit. Minimum payments are set at 2.5% of the outstanding balance, compared with the standard 2.1%. The interest rate is set at the prime rate plus 9.4%, as opposed to the standard 9.9%.
The USAir discount varies from market to market, but AT&T claims that students can save up to 46% on the price of a plane ticket.
American Express student cardholders, by contrast, pay either $159 or $259 for round-trip tickets depending on whether the trip crosses the Mississippi River or stays on one side of it. Also, one coupon offers savings of $50 to $75, depending on the ticket price.
In addition, American Express cardholders get 30 minutes of free long- distance MCI calls every month for a year.
AT&T and American Express are betting that college students consider travel discounts the most important credit card benefit. And indeed, research shows that college students are avid travelers.
Strategic Marketing Communications, Ridgewood, N.J., which publishes Collegiate Trends, said a recent survey found that 86% of college students said they had flown domestically within the preceding 12 months, and 22% had traveled by plane abroad.
Marketers typically target the 5.1-million-strong core college segment, said Mr. Weil. This group comprises undergraduates enrolled in four-year, full-time degree programs. It totals 36% of the 14.1 million student population. According to Roper CollegeTrack, a market research firm, 59% of college students in this group own a credit card.