Star Bank Corp. of Cincinnati is fighting back.

Issuing cards mainly in Ohio, Kentucky, and Indiana, Star began to feel squeezed by the low-interest-rate direct-mail solicitations of national competitors like Wachovia Corp. and Signet Banking Corp.

Today, Star Bank begins its counterattack. Direct mailings to most of its current customers offer a standard Visa or MasterCard at prime plus 3.9%, currently 9.9%, if they transfer $ 1,000 in balances from other cards. Gold cards would be at prime plus 2.9%, or 8.9%.

Star is waiving annual fees for the first year and includes purchase protection in the package.

"We are very much a leader in our market, so our strategy is to save what we have and to get some of the attrition back," said Collin McKenney, senior vice president of Star's card services group.

In April, after four months of steady decline in sales, the bank sent a survey to 1,000 customers who had not used their cards since Christmas. A crisp $1 bill was tucked into each envelope as an incentive to participate.

At least 500 customers said they had not used their cards because the interest rate was too high and they believed their credit lines should be larger.

In response, Star Bank will increase a cardholder's credit line by the amount of debt transferred to the account.

"When we saw our customers leaving for lower-rate cards, we decided to compete mainly on the basis of interest rates and annual fees," said Ms. McKenney.

Varied Menu

The new rate applies to the entire account, including current customers' old balances. And unlike programs that treat balance transfers as cash advances, Star's gives a 25-day grace period before interest accrues.

Star's mailing comes in several versions.

A customer with a 14.5% standard card (prime plus 8.5%) with a 25-day grace period and $20 annual fee will be offered the 9.9% rate for one year, and thereafter if the balance is at least $2,000. Similarly, a customer with a 13.5% card (prime plus 7.5%) with no annual fee or grace period can go to 10.9% (prime plus 4.9%).

Star also offers gold card options. A customer with a 13% card with a $40 annual fee and 25-day grace period would be offered the 8.9% rate. After a year, the credit balance would have to be at least $3,000. A 9.9% rate is offered to gold holders paying 12.5% and no annual fee.

New customers, to be solicited in the fall, would be eligible for all of the introductory rates.

Hopes Pinned on Fee Waiver

Star Bank, 74th in card loans at the end of the first quarter, hopes to make hay on its fee waiver. Signet and Wachovia, respectively 17th and 18th, charge annual fees on low-rate cards.

An official at Wachovia said it is looking at ways to lower its relatively high annual fee - $39, and $10 more on gold cards.

Rocky Mountain Bankcard System is the latest issuer to dangle a zero interest rate offer.

To build its card loan portfolio, now less than $1 billion, the Denver company is waiving finance charges through December on balances that customers transfer in.

The transfer incentive was announced along with a new variable-rate structure that will result in lower finance charges starting in November.

The rate for purchases with standard cards will be prime plus 9.9%. or 15.9%. The rate on gold cards would be 1 percentage point less. The rate for cash advances would be prime plus 11.9%.

First Bank System Inc., Minneapolis, recently acquired Rocky Mountain through purchase of its parent, Colorado National Bank.

Fleet Financial Group Inc. said its Fleet Bank unit forgave MasterCard and Visa interest for people affected by the Midwest floods, as well as deferring payment-due dates for 30 days.

The Rhode Island-based company said it extended the deadlines for 12,000 customers in Missouri, Illinois, Minnesota, Wisconsin, Iowa. Kansas, North Dakota, and South Dakota.

A. Christian Fredrick, senior vice president, said the bank used print and radio advertising to announce its offer while postal service was disrupted in the affected areas.

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