The controversial Prime Option Visa card, the center of a lawsuit that Sears, Roebuck and Co. has filed against Visa U.S.A., would have a pricing structure unique in the credit card world.

According to court testimony, Sears' Dean Witter Financial Services Group would charge Prime Option holders a fixed interest rate of 9.9% for up to two months after purchases.

Beyond two months, cardholders would pay a variable rate of prime plus 9.9% -- 15.9% at current rates -- on revolving balances. There would be no annual fee.

Exclusion Contested

The new approach to interest rates was revealed by Philip Purcell, chairman of Dean Witter, in federal court in Salt Lake City, where his company is seeking to overturn a Visa association bylaw that prohibits the Sears unit from joining.

Prior the Oct. 13 opening of the antitrust trial, Dean Witter had kept Prime Option's features tightly under wraps. The intention to offer the card was announced in January of last year.

Card industry observers said Prime Option's pricing is typical for Dean Witter, which is known for designing elaborate rate and fee structures that appeal to consumers without sacrificing revenue.

The Discover card, for instance, charges no annual fee and gives cash rebates based on usage. But its method of calculating interest can be costly to some cardholders.

Sears is "very good at playing with the numbers," said Robert B. McKinley, president of RAM Research Corp., Frederick, Md., which monitors card pricing. Mr. McKinley is scheduled to testify at the trial this week on Visa's behalf.

Mr. McKinley, who said he will not be paid for his trouble, intends to say that contrary to Dean Witter's claim, there is a great deal of price competition among the bank issuers of Visa cards.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.