The Anti-Credit Card: <i> Japanese Firms Create Fad That Gives Them Cash Up Front</i>

Perhaps only the Japanese, who financed an economic miracle through their devotion to saving money, could have devised and embraced the latest rage here: anti-credit cards.

While U.S. shoppers rack up credit card debts, Japanese consumers are turning to “prepaid cards”--thin, magnetically encoded plastic cards that give customers the uniquely Japanese privilege of paying now and enjoying later.

The boom in prepaid cards, which come in thousands of designs, began with pay telephones, where their convenience quickly assured their popularity.

But soon customers will be able to “pre-buy” cigarettes, taxi rides, groceries, pinball games and even Japan’s most popular hamburger, the Big Mac.

The cards are becoming so popular, in fact, that the Finance Ministry has set up a task force to study whether they are in danger of replacing money--and if so, what should be done about it. According to Paul R. Heaton of W. I. Carr, a merchant bank, the market for prepaid cards will expand to more than $8 billion U.S. (1 trillion yen) within a few years.

The popularity of the cards, which amount to a massive interest-free loan from customers to the corporations involved, somewhat mystifies many non-Japanese.

‘Quite Incredible’

“In the U.S. and the U.K. we’re on a credit card boom, and here they’re on a reverse credit card boom,” said Richard Jerram, an economist for the Kleinwort Benson International bank in Tokyo. “It’s quite incredible, isn’t it?”

Credit cards are just catching on in Japan, where the lack of crime allows consumers to carry large wads of cash. But prepaid telephone cards, which Nippon Telegraph & Telephone Corp. introduced in 1982, quickly became popular.

The cards, considerably thinner than a credit card, can be purchased in denominations of about $4 to $40 (500 to 5,000 yen) and used in pay telephones specially designed to read them. They are inserted into the phone before dialing and then are returned at the end of the call, with the face value reduced according to the length of the conversation.

The cards eliminate the need to carry exact change and allow customers to make long-distance calls without feeding coins into the phone. Their convenience has led to their introduction in South Korea, Hong Kong, Italy, France and the United Kingdom, and AT&T; is looking at the possibility for the United States, according to company officials here.

But the fad-conscious Japanese embraced the cards with a unique fervor. For one thing, they quickly discovered that the cards make ideal gifts, always a plus in this gift-addicted society. Salespeople hand them out instead of calling cards; companies send them in return for answering surveys; politicians print their photos on them and pass them along to voters.

In addition, the Japanese soon turned the cards into new canvases for their artistic skills. Cards were illustrated with old woodblock prints, views of beautiful scenery or teen-age idols in the singing and acting world.

Card-collecting clubs sprang up, and some stores now deal in rare or vintage cards. Telephone card collectors are said to number in the hundreds of thousands--many buying and holding cards without ever using them, to the delight of the telephone company.

After selling 9 million cards in 1984, NTT sold 60 million in 1985, 149 million in 1986 and 228 million in 1987, for a total of more than $2 billion, according to Heaton.

McDonald’s Cards--With Fries

“The cash comes in first, and even if the customer loses the card, it’s not the company’s responsibility,” said one foreign telephone company executive. “It’s ideal.”

Those virtues were not lost on other firms.

In November, McDonald’s began test-marketing the “U-Card,” embossed with photographs of fries and burgers and available in denominations of $8, $24 or $40. Three McDonald’s outlets, with 14 more to follow in February, were equipped with machines that can read the cards as payment instead of cash.

A McDonald’s official here, Tatsuki Kubo, said the cards are selling well, both as gifts and for personal use, and mostly to young people. “I think it could be very promising,” he said.

The McDonald’s cards are made by the Japan Card System Co., which also produces them for Coca-Cola vending machines and Baskin-Robbins ice cream stores.

According to Hiroyuki Fujita, the U-cards can be used for Cokes, Big Macs or ice cream--although cards purchased at Baskin-Robbins stores have pictures of cones, not fries. In a sure sign of the cards’ trendiness, the “U” has a basis in English--it stands for “useful, ultra, universal and united,” Fujita said.

Fujita’s company benefits from the use of the interest-free funds between the time a customer buys the card and the time its value is exhausted.

One benefit to McDonald’s is that a cardholder would presumably be less likely than otherwise to wander into a Burger King or a neighborhood sushi shop. But why the cards are appealing to consumers is less clear to outside analysts.

“Once again, I wouldn’t really see a benefit,” said another baffled foreigner, Harrison Bates of W. I. Carr. “But I know it would be beneficial to McDonald’s. . . . You tend to spend more than you would otherwise, because you don’t see the cash going out.”

More Like Money

Several companies such as Japan Card System have been formed to market the cards and card-reading machines to taxi companies, convenience stores and even pachinko parlors, Japan’s equivalent of pinball arcades. Their hope is to sell cards that would be usable in various places, instead of having customers carry separate cards for telephones, subways, fast food and so on.

But as the cards become more “universal and united,” the nation’s financial bureaucrats become more unsettled.

“We have to make it clear that this should not be money,” said Kosuke Takahashi, a Finance Ministry official serving on the special government task force to study the prepaid card boom.

“If it has just one use, obviously it’s not money,” he said. “If it’s good for everything, it could be argued this is very close to money. So the question is where to draw the line.”

Takahashi said his task force expects to devise recommendations by spring.