Residents of a Long Island, N.Y., town are resisting a proposal to raise revenue by offering credit cards.
In an affinity program with National Westminster Bank USA, North Hempstead, population 210,000, would receive $5 for each card issued to residents.
Meanwhile, cardholders would be allowed to apply up to 1% of their purchase amounts toward local taxes. The rebate calculation would be similar to that on Dean Witter, Discover & Co.'s Discover credit card.
Residents Booed Proposal
But some North Hempstead residents and consumer advocates booed the proposal when it was aired at a recent hearing.
According to an article in the newspaper Newsday, the response was in protest of the proposed 15.9% interest rate, even though it is below the 17.3% national average.
Some critics say the marriage of governance and marketing sets a dangerous precedent.
"This kind of program encourages people to incur debt. I don't think this is a wise way for government to cut taxes," said Richard Kessel, the state Consumer Protection Board's director.
He added that the program would tend to favor the rich, who are able to charge more and pay off their balances without incurrring finance charges.
A spokesman for Town Supervisor Ben Zwirn said North Hempstead is likely to go ahead with the card once the State Comptroller's Office completes a review that was requested by one of the town's board members.
A spokesman for Natwest said it was too soon to provide other details about the program.
Potentially Lucrative Market
Card marketers see governments as a potentially lucrative outlet for affinity programs, which play on cardholders' loyalty to a given orgnization or cause.
MBNA Corp., the Delaware banking company that is the largest affinity issuer, has been marketing to states, but is emphasizing the loyalty factor, not strong usage incentives like Natwest's.
Countering Mr. Kessel's criticisms, Michael Auriemma, a card marketing consultant who is not involved in the North Hempstead promotion, said that fears about revolving debt are overblown, and that the wealthy are not the only ones who could benefit. The rich might charge more on their cards, but their taxes are higher, he said.
Mr. Kessel, who plans to run against Mr. Zwirn in the Democratic primary for Nassau County executive, said he did not expect to raise the credit card as a campaign issue.