Sears and K mart unit to test outside cards.

Two major retail chains are about to open their doors to more credit cards.

Sears, Roebuck and Co. -- the last major holdout in honoring outside cards -- said Thursday that it would begin accepting MasterCard, Visa, and American Express cards at 140 stores in six cities as part of a pilot program that begins on Monday.

Separately, Pace Membership Warehouse will announce on Monday a test in which it will accept MasterCard at 20 stores in six cities.

A Change of Direction

Pace, owned by K mart Corp., accepts only the Discover card, which is issued by a Sears affiliate. Pace will be the first warehouse club to accept cards from the major bank card associations.

Sears' decision to accept bank cards represents a major reversal for the giant retailer. Until now, it has accepted only its own in-house store card and Discover, issued by a bank owned by Dean Witter Financial Services Corp., Sears' brokerage affiliate.

In the late 1970s, and again in 1989, Sears Merchandise Group briefly tested bank cards but concluded they were too expensive to process.

"Because of changes in the credit climate and changes in retailing, we thought it justified another test," said Perry D. Chlan, a spokesman for the retailer.

A Timely Switch

Sears' timing, however, appears propitious. The troubled chain is preparing to spin off Dean Witter and its Discover card to shareholders, making it more amenable to other charge-card avenues.

Moreover, it won a court case against Visa last week that will permit it to issue Visa cards.

Mr. Chlan denied that the credit-card test was related to either decision. He said only about 5% of Sears' $31.4 billion of sales revenue in 1991 was charged to Discover.

Indeed, Sears has been accepting Visa nd MasterCard for catalogue sales since May.

Test Volume Projected

MasterCard said it expects Sears' customers to charge about $15 million to its bank-issued cards during the test period, which will extend into early 1993. Visa U.S.A. and American Express Co. would not provide estimates of potential volume.

"Conseratively, [MasterCard] could expect over $500 million in volume annually, if the roll-out becomes national," said Ted Jablonski, who heads retail marketing at MasterCard.

MasterCard estimates there is the potential for $200 million of bankcard volume if Pace decides to accept the cards nationally.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER