Key Federal Savings Bank is steering its card marketing engine in a new direction.

The Havre de Grace, Md.-based bank is selling secured credit cards to people who have been approved by General Acceptance Corp., a finance company that underwrites subprime auto loans.

The partners are a good match because both target people with poor credit records, said Robert M. Bouza, president of credit card services at Key Federal.

Moreover, the relationship is especially sweet for Key Federal, a secured credit card specialist, because General Acceptance takes care of card marketing.

For the past three months General Acceptance has been testing the offer with existing customers, garnering Key Federal 5,000 new accounts. In total, the thrift has 87,000 cardholders and $54 million of receivables.

When customers are approved for a General Acceptance auto loan, they are also offered a preapproved application for Key Federal's standard secured product, a card charging 18.9% interest and a $35 annual fee, plus a $250 deposit requirement. The Visa card carries General Acceptance's name on the front.

Key Federal, like other small institutions focusing on the secured card market, has been hit hard by bigger banks' relatively new interest in the product. As a result, Mr. Bouza has been searching for ways to reduce the $238 million-asset thrift's marketing costs.

"The advantage for Key Federal is a much smaller marketing expense," said Mr. Bouza of the General Acceptance card. Customer "acquisition costs have been greatly reduced." General Acceptance has relationships with 1,200 auto dealers nationwide. Mr. Bouza said his unit is testing several other programs with companies that do business with the subprime market.

The finance company recently began offering the card to new customers applying for car loans.

Customers may either buy a road assistance insurance plan from General Acceptance for $239.80, which can serve as the secured card deposit, or they can decline the insurance and pay the cash deposit.

General Acceptance is willing to forgo profits from its road assistance product, said Mr. Bouza, because it believes the card program will build customer loyalty.

Typically, General Acceptance customers buy used cars and replace them within 18 months. The company hopes that customers holding General Acceptance cards will ask it to finance their subsequent cars, said Mr. Bouza.

The auto loan-secured card package is being positioned as a way for people to reestablish good credit.

"The more good lending in their history, the better off they are," said Mr. Bouza. "A secured card alone" is not enough to demonstrate good financial management.

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