Credit cards and instant gratification are often considered synonymous. Now some card companies are pushing the envelope with a product that gives consumers the ability to shop on-line the minute they are approved for a card.
A handful of the largest card companies - including Chase Manhattan Corp., Capital One Financial Corp., and the First USA division of Bank One Corp. - recently began assigning MasterCard and Visa account numbers to Web shoppers who apply through the Internet. But fraud concerns have led them to keep fairly mum about it. "Giving a person a card to start charging with immediately is a license to steal," said Janet McCabe, director of investor relations for Capital One in Falls Church, Va.
So why are they doing it at all?
Competitive pressure is the answer that tops the list. NextCard Inc., an Internet-only credit issuer that has introduced several innovations, was among the first companies to grant instant lines of credit, and executives there say this feature is a natural evolution for the industry.
"If you are at Amazon.com, see a banner ad for NextCard, and you apply, it would be much more powerful for us to give you credit right when you are shopping," said Michelle DesMarais, a spokeswoman for the San Francisco-based issuer. NextCard promises 30-second credit decisions to people who submit applications electronically, and successful applicants are granted account numbers they can use moments later.
NextCard does not tout the instant credit feature on its Web site, and competing card companies are also keeping it quiet. Instead, they are "surprising" consumers with it once they have been approved on-line for a card.
Capital One's chairman and chief executive officer, Richard D. Fairbank, said this is the direction "the card world is going," but he agreed that instant credit raises concerns about fraud.
Card companies use different types of fraud prevention software and rely on a panoply of data bases for Internet credit checks. Theoretically, a fraud could apply for multiple cards, charge a plethora of merchandise, and not be caught until the monthly bills were sent out.
"Verifying someone's identity in the physical world is difficult, and on-line it is even more difficult," said Wesley Wilhelm, director of consulting at eHNC Inc., a San Diego software company that develops anti-fraud products.
For example, some card issuers examine applicants' handwriting to determine where they were taught to write. "If I'm Bill Smith and it looks like I'm writing in an Asian or Middle Eastern style, that gets flagged," Mr. Wilhelm said. The Internet is incapable of such analysis.
Instant credit products will show a higher level of fraud, Mr. Wilhelm said, but they are also too new for anti-fraud measures to have been tested for effectiveness. He said his company is exploring ways to combat this kind of fraud.
Meanwhile, card lenders are taking precautions. Chase, for example, grants only $250 of credit on the spot. When the cards arrive in the mail 10 days or so later, it increases the credit line. Similarly, Capital One and First USA make only a small portion of a consumer's credit line available immediately.
NextCard, however, makes the entire credit line available right away. "If you qualify for $2,000 or $5,000 of credit, you get that full limit," said Ms. DesMarais. It feels safe in offering the full credit instantly, which it has done since August, because of a proprietary fraud data base it has developed, she said.
First USA has been doing this for about a year. Jeff Unkle, a spokesman, said: "The true advantage with this product is that consumers are on-line and likely want to shop."
Chase has been offering instant credit since November, when it started a cobranded MasterCard with ShopNow.com.
Capital One expects instant credit to attract consumers who are looking for "more attractive credit card terms," said Ms. McCabe, the investor relations director.
Capital One only began marketing instant credit two months ago.
Ms. McCabe, who declined to identify the Web sites on which Capital One is making the product available, said, "If we advertised this, it would be like waving a red flag in front of a bull."