Credit cards are in more people's wallets than ever before and the two bank card brands, Visa and MasterCard, continue to be consumers' top choices.


The annual American Banker/Gallup consumer survey showed 89% of 1,024 randomly selected households had at least one credit card, and 78% had a MasterCard or Visa.

Among individual brands, Visa led at 66% of households. The only greater response was in the fragmented "retail store card" category, at 72%.

MasterCard came next at 53% -- its three-point rise in 1994 equal to that of Visa.

Visa also remained No. 1 by a sizable margin in cards that consumers say they use most often, at 39%. It was up two percentage points -- within the statistical margin of error -- while MasterCard was up by one point, to 22%.

Since 1990, Visa has seen the most-used number shoot up by eight percentage points, while MasterCard, despite a measurable increase in transaction market share, barely held its ground.

Among other major brands, Discover had a healthy five-point increase in cardholding households this year, to 31%, and American Express, including its Optima program, fell a slight two points, to 24%.


Those nonbank brands are lagging in the most-used measure, American Express at 7% and Discover at 6%.

Consultant K. Shelley Porges of Porges/Hudson Marketing Inc., San Francisco, said Discover's outstandings have declined. "The fact that they've gotten into more households doesn't guarantee that they'll have profitable growth," she said.

Ms. Porges said the Discover card's high interest rate makes it unattractive for consumers. "Pricing is the No. 1 motivator of revolvers -- it's no surprise [low-rate issuers] have captured the greatest share while others have declined," Ms. Porges added.

She said bank card issuers Signet Banking Corp., First U.S.A. Inc., Household International, Wachovia Corp., and Advanta Corp. have the five top growth portfolios.

Ms. Porges' assessment is "at odds with our numbers," said Timothy Lee, spokesman for Dean Witter, Discover & Co. "Discover transactions are doing very well, our business is excellent."

Jan Soderstrom, senior vice president, advertising and marketing services for Visa, said the numbers show that member banks have been very successful in attracting cardholders and getting them to use their cards in a competitive marketplace. She added that it attests to Visa's brand strength.

The survey indicated that of people with at least one Visa card, 51% say they use Visa most often. MasterCard converts only 36% of its card-owning households into primary users of its brand, compared to American Express' 31% and Discover's 17%.

Visa U.S.A.'s own third-quarter numbers bear out the survey results. Transaction volume was up 28.2% over the same quarter last year, to $74.7 billion from $58.3 billion. The number of cards in circulation in the United States rose 21.3% to 196.5 million.

MasterCard also had significant growth. U.S. charge volume rose 25.6% over the 1993 third quarter, to $44.7 billion from $35.6 billion. The number of cards increased 19.9% to 131.8 million.

Robert L. Lattera, MasterCard vice president of market research, said the American Banker survey responses may reflect a "perception bias" in favor of Visa. "MasterCard is growing in terms of share of accounts, Visa is not," he said.

Mr. Lattera said that according to statistics compiled by an independent consulting firm, which tabulates figures from 2,000 consumer bank card statements, Visa's market share increased from 67% to 68% since 1991, while MasterCard grew from 52% to 56%.

"Consumers may think of Visa more because of advertising and the fact that they have more cards, but the reality is that we grew faster than they did," Mr. Lattera said. "Consumers may perceive that they're using the card more, but in actuality they're not."

He attributes MasterCard's gains to strong cobranded programs, the "Smart Money" advertising campaign, and value-added programs like MasterValues. "The good news is bank cards are growing," he said.

"In consumer surveys we've done in the last 10 years, we have registered a major perception advantage over MasterCard in every category," said Ms. Soderstrom. She attributes Visa's success to smarter marketing on the part of Visa members and the consistency of the association's "It's everywhere you want to be" advertising theme. She said that consumer preference leads banks to choose Visa for their direct marketing campaigns, in turn boosting Visa's appeal.

Mr. Lattera said bank statistics show usage is "dead even" between Visa and MasterCard, at about nine times per quarter.

Visa, which has been matching or exceeding MasterCard's recent volume growth rates, claims to have stemmed the tide of cobranding-related market share gains MasterCard enjoyed over the last few years. "Now that Visa is firmly involved in cobranded offerings, we have begun to change the trend," said Ms. Soderstrom.

"MasterCard was riding pretty high in 1993 and in fact did grow faster than Visa, gaining market share thanks to GM, GE, and AT&T cards," said Robert B. McKinley, president of RAM Research in Frederick, Md. But he said that in 1994, cobranded cards with high interest rates have lost some luster.

While 58% of MasterCard's volume is in value-added programs, Visa has exhibited growth in all areas -- corporate, travel, and entertainment, its positioning against American Express, and Visa Gold -- giving it broader appeal, said Mr. McKinley.

Frank Skillern, president of American Express Travel Related Services Co.'s U.S. consumer card group, said the survey did not fully portray that company's gains.

"You really only have part of the picture here without [including] the corporate card," he said.

He added that the corporate card had an outstanding year, continuing to gain market share, billed business, and accounts. The charge card giant's own numbers indicate that consumer accounts have shrunk 3.6%, from 11.5 million last year to 11.1 million this year.

Although experts say that retail store cards are losing ground to general purpose cards, the survey shows they gained a marginal 2% in total households over last year, to 72%. While the numbers have hovered between 70% and 72% since 1991, in 1990 only 63% owned a retail store card.

Thirty-nine percent of respondents own an oil or gas company card, which is about equal to levels of the past four years. These cards are most-used by 10%, the retail cards by 13%.

Diners Club cards are down to 2% of households, from 4% in 1993, and a negligible number of respondents prefer the Citicorp travel and entertainment product over other brands.

Lowering rates has been an effective way for banks to lure customers over the past several years, but only 21% of those interviewed were inclined to switch cards for a 1% rate decrease, down from 26% in 1991.

For a 2% interest rate drop, 41% of respondents were strongly inclined to switch. That was still less than the 46% in 1991.


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