Sears Unveils Its New Credit Card : Multipurpose ‘Discover’ to Get 1st Test Marketing in Fall
Sears, Roebuck & Co. on Wednesday unveiled its new Discover credit card, which it plans to introduce to customers this fall in Atlanta.
Edward A. Brennan, president and chief operating officer, told a gathering of financial analysts here that the new credit card will provide conventional bank-card services plus make holders eligible for an array of services offered by the Sears Financial Network.
While he declined to provide details about fees, charges or businesses that have agreed to accept the card, Brennan said the Discover card will attract consumers because “it will help them save--as well as spend and invest. We believe the variety of services it will provide makes it the best product and value in the marketplace.”
The card has features that other general-purpose credit cards, such as Visa and MasterCard, don’t have.
Brennan said the Discover credit and financial-services card will be implemented on a pilot basis in Atlanta “because of technical hurdles. I think we need experience before we go national.”
The card is to be issued through Greenwood Trust Co. of Delaware, which is owned by Sears, and will be accepted at Sears’ 796 retail stores and more than 3,000 branch offices of its subsidiaries: Dean Witter Financial Services, Allstate Insurance, Coldwell Banker and Sears Savings Bank.
Brennan said the card project is an “expensive undertaking” but will have no material effect on profits in 1985. He told analysts that costs associated with it are expected to have a material effect on earnings in 1986 and 1987. By the third year, he said, “we’ll begin to do very well with it on the bottom line.”
Brennan said card users will be able to purchase goods and services from a variety of outlets, including other retailers, airlines and hotels. In addition, users will be able to get emergency cash, cash checks and be protected in case the card is lost or stolen.
A prototype of the card showed the Discover name in bright orange and yellow against a dark background. The phrase “Sears Financial Network” is repeated in small gray letters across the bottom half.
Walter Loeb, with New York-based Morgan Stanley, was one of many analysts expressing concern over whether other retailers would be willing to accept the card with the Sears name on it. Sears officials scoffed at that notion, saying many retailers have already expressed interest in the card.
The Discover card will also offer an “attractive package of enhancements,” which Brennan declined to detail. He did say card holders will be eligible for a variety of discounts and premiums from several large companies, including Sears.
Brennan also said Sears will offer exclusively to card holders a new “family savings account,” whose tiered interest-rate structure will increase with an account’s balance. Sears has been pushing for legislation to sanction “family banks,” which, unlike conventional banks, would not make commercial loans.
The Discover card also will offer a package of Dean Witter financial services. For example, the fee for setting up a self-directed individual retirement account would be waived.
Brennan also said Sears is negotiating with existing automated teller networks to make their machines available to Discover card holders. Any cash withdrawn would be charged to a user’s account.
In other developments:
- Sears disclosed at the meeting that it will depart from its own brands of appliances for the first time and test market Sony and RCA televisions and videocassette recorders in June in San Francisco and Atlanta.
- Sears’ Allstate Insurance Group said personal insurance rates will rise 6% to 7% this year.
- Sears said it will remodel 90 Sears stores, down from the original target of 117, by Sept. 1.
- The company has frozen plans to open 45 more Business System Centers because of a chaotic computer market.