One of the most popular marketing strategies in credit cards may be losing some luster.

Banks that have teamed up with affinity groups and corporations are finding that their partners are demanding a greater share of both the control and the profits.

The AFL-CIO is latest partner to flex its muscles. The giant labor union announced last week that it has picked Household International to issue its Union Privilege credit cards when an existing 10-year contract with Bank of New York Co. expires next February.

Bank of New York will have until then to match Household's offer, which guarantees the union $375 million over five years.

The labor union's effort to obtain a more profitable deal may embolden other affinity partners to reevaluate their arrangements with financial institutions. A number of such contracts will soon be up for renewal, having been forged four or five years ago.

As competition in the card industry heated up over the past several years, many issuers launched cards aimed at people affiliated with schools, companies, and other organization. Lenders also teamed up in "cobranding" deals with airlines, automakers, and other companies. Such programs offer rebates and other benefits to cardholders.

"When a program is successful, it creates an opportunity for the cobranded partner to evaluate the product offering, to improve their position," said Don Berman, president of Cardholder Management Services, Plainview, N.Y.

At least three other entities have demanded a greater portion of the profits from affinity or cobranding relationships.

Northwest Airlines broke off its contract with Banc One in 1994, and is offering its frequent-flier program with First Bank Systems Inc.

Last year, the Automobile Association of America requested bids from financial institutions to issue its membership credit card. Banc One and Mellon Bank Corp., which had arrangements with regional auto clubs belonging to the AAA, lost out to PNC Bank Corp in January.

Also last year, U S West Communications, the regional telephone company, left U.S. Bancorp to align with Household International.

"One partner cannot be making an inordinate amount of the profits," said Mr. Berman, referring to the Bank of New York.

Household's offer, according to sources close to the deal, is significantly more than the labor union had anticipated. First Union Bank finished second among those submitting proposals.

Union Privilege, currently branded a MasterCard, has a variable interest rate of 13.5%, no grace period, and no annual fee.

Household plans to offer the same product with identical terms, but it would also launch several new card products, including a secured credit card, and one that offers a grace period. Currently, union-owned Amalgamated Bank of New York issues the Union Privilege secured card.

In addition, Household wants to market a balance transfer offer that would allow union members to pay off their transferred balances at the prime rate.

David Silberman, an attorney advising the AFL-CIO's Union Privilege division, said the union believes Household will approve more of its members for credit cards because the bank has superior modeling technology.

Warren Wilcox, executive director of Household Credit Services, a subsidiary of Household International, said that his unit would take over the marketing of Union Privilege, which is currently handled by Affinity Group Marketing rather than by the Bank of New York.

"My understanding is that AGM has been fairly passive in marketing Union Privilege," said Mr. Wilcox. "It is a $3.6 billion business that has been dormant for the past several years."

The AFL-CIO has 13 million members and there are two million Union Privilege cardholders.

Mr. Wilcox said he expects a decision regarding who gets the contract will be reached before the deadline - next Feb. 28 - but added: "We shouldn't discount the fact that as the incumbent, the Bank of New York has the advantage."

He said Household also hopes to leverage its relationship with the AFL- CIO to offer other financial products, such as home equity, student, and auto loans.

Credit card issuers view union members as particularly desirable customers because they pay their bills on time, are more loyal than the general population of credit card users, and have higher incomes than nonunion workers, said Jon Ross, a spokesman for Union Privilege.

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