Visa and American Express have renewed their perennial advertising debate, this time over Optima True Grace.

American Express introduced its new revolving credit card in September, touting at least a 25-day grace period for each purchase.

Since late last month, Visa has been running full-page ads in The New York Times, The Wall Street Journal, USA Today, and daily papers in 11 major cities to pin-point True Grace's shortcoming: merchant acceptance.

Visa's ad shows a globe sprinkled with dots to depict merchants accepting True Grace. A second globe is covered with many more dots to illustrate Visa's superior acceptance.

Last week, American Express answered in the same papers with a series of double-page denunciations of Visa. One ad asked: "Why is Visa incorrectly claiming seven million more merchants than American Express? (We challenge them to name them.)"

American Express answered its own question: "So you won't notice the $1.5 billion unnecessary interest they charge you."

A day later, American Express ran another ad, which depicted an expanding balloon signifying interest charges. "We thought Visa only inflated interest charges," said the text. "Now they're inflating the number of merchants who accept their Card."

"Whenever we find Visa skirting on the edge of truth, we decided we would take them to task," said Marcos Rada, an American Express spokesman. Merchant acceptance is the current flash point.

Visa says it is accepted by 11.3 million merchants worldwide, while American Express says it has more than 3.7 million merchants and should grow by some 200,000 this year.

"We stand by our ads," said Visa spokesman David Brancoli. "The fact is American Express is far inferior to Visa when it comes to merchant acceptance."

"We acknowledge the fact that there is a gap in the number of places that take us and take them," Mr. Rada answered. "But it's not as large as they claim it to be."

At many retailers with the American Express card, "you have to ask if you can use it, whereas you can assume retailers will take Visa and MasterCard," said Robert B. McKinley, president of RAM Research Corp., Frederick, Md.

The situation is different at travel and entertainment merchants, he added, where American Express has strong acceptance.

American Express contracted an outside economist to calculate the amount of "unnecessary interest" Visa cardholders without grace periods were charged in a year. That yielded the $1.5 billion figure, which Visa questioned.

In its September issue of Card Trak, a consumer newsletter, RAM Research reported that Americans charged more than $400 billion on bank credit cards in 1993, but carried interest-accruing balances of about $225 billion.

American Express said its True Grace cardholders will have about 40 days to pay for their new purchases and avoid an interest charge.

The card comes with a 7.9% introductory rate for the first six months, then the rate jumps to prime plus 8.75%. There is no annual fee the first year, and cardholders can avoid a $25 fee thereafter by using the card at least three times a year.

"Clearly, Visa is feeling threatened by our introduction of True Grace," Mr. Rada said. "They've introduced a red herring to distract from the fact that the consumer is charged an unnecessary interest rate."

But Visa said True Grace affords the opportunity to extend its "Everywhere you want to be" advertising theme.

"Our feeling is we should operate from our position of strength," Mr. Brancoli said. "We're far superior on the merchant side."

Indeed, in past squabbles -- including occasions when American Express lodged formal complaints about Visa's advertising claims -- Visa has always used merchant-acceptance leadership as its trump card.

"What amazes me is that Visa would call attention to True Grace," said Anne M. Moore, president of Synergistics Research Corp. in Atlanta.

The product has a number of positive attributes, she added, especially the 25 days of grace "that can translate into huge amounts of money" for balance-hoppers, Ms. Moore said.

Overall, Mr. McKinley agreed, True Grace is a creative product. "It puts a lot of heat in an area where there's not been a lot of competition. Coupled with everything else they're going to try, it looks good for them."

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.