The latest supermarket chain to launch a cobranded card said it offers the best deal - an unlimited 2% rebate based on all purchases made with the card, anywhere.

The rebate, clearly exceeding the more common 1% on in-store purchases only, can be applied to grocery purchases at four chains owned by Penn Traffic Co., Syracuse, N.Y.

The Penn Traffic MasterCard, issued by National Westminster Bank, comes with a fixed introductory interest rate of 8.9% and no fee the first year. In an initial six-month promotion, preapproved customers will get a $5 grocery gift certificate.

Penn Traffic operates 285 supermarkets in the Northeast; it will issue cards bearing the names of Big Bear, P&C Foods, Quality Markets, and Insalaco's.

Supermarkets are a relatively new frontier for bank credit cards, and the cobranding option is attracting a growing number of stores seeking ways to build customer loyalty.

According to MasterCard International, credit cards were used to buy $3.5 billion worth of groceries at more than 18,000 supermarkets in 1994.

"It's a strong proposition for consumers when they realize that every time they spend $500 they earn a $10 coupon," said Mary E. Henick, director of marketing for NatWest Bank's credit card unit. The coupon, good for purchases at Penn Traffic stores, comes with the monthly statement as soon as it is accumulated, unlike other reward programs that pay out at the end of a year.

In Ohio, Penn Traffic's Big Bear markets compete against the king of the food chains, Kroger Co., which launched its MasterCard program with Fifth Third Bancorp of Cincinnati in 1993.

Kroger, which owns 2,200 stores in 24 states, offers a 1% rebate, with a $500 cap, on purchases made at its stores. If the consumer spends more than $2,500 for the year, the rebate jumps to 2%.

"The (Penn Traffic) value proposition clearly is significant," said Michael Auriemma, president of Auriemma Consulting Group Inc., Westbury, N.Y. He acknowledged that a 2% rebate sounds costly.

"Most supermarkets and banks can't afford it," the consultant said. "Maybe they did it to stifle the competition."

Robert McKinley, president of RAM Research, a Maryland-based card tracking firm, called it a case of one-upmanship.

"To a certain extent, it does raise the bar, but it doesn't mean everyone has to match this or they can't get onto the playing field," said Nicole Risafi, director of supermarket acceptance for MasterCard. Supermarkets could offer other perks such as no interest on food purchases, special discounts, and frequent shopper promotions, she said.

"The fact that this makes it harder for the competition only reinforces the good sense of this decision," said Ms. Henick. She said NatWest wants to strengthen its position in the credit card business, expanding what is primarily a gold card portfolio.

At yearend 1994, the New York-New Jersey bank had 700,000 accounts with loans outstanding of almost $1.1 billion. Penn Traffic is its first major cobranding venture.

While the rebate is a good deal for consumers, the annual percentage rate is good for the bank.

After the six-month teaser period, the Penn Traffic cards' interest rate rises to 9.9% above prime, with a cap of 19.8%. There is a 25-day grace period and a $20 annual fee after the first year, but the fee may be waived.

Kroger offers a gold card with an interest rate of 2.9% more than prime, or a standard card at 8.9% more than prime and no annual fee.

Kroger spokesman Paul Bernish said that, given the grocery industry's slim margins, it isn't looking for a "profit-draining battle." But he added, "We will evaluate the potential impact of this new entry and whether we should respond and, if so, how."

Mr. McKinley said the Penn Traffic card has value for the consumer if it is used "responsibly." He noted that banks could pick up lower-quality receivables on grocery-based cards, with higher delinquency and chargeoff rates.

James Lash, a Penn Traffic spokesman, said customers have indicated they want to pay with credit, which is what prompted the decision to issue a card. He said the tradition began in corner grocery stores where neighborhood customers ran up tabs.

"The weekly grocery bill is a substantial expense, and people want to pay in the most convenient way," said Mr. Lash.

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