Citibank, MCI Offering Joint Credit-Phone Card : Credit: The rollout comes three months after AT&T; unveiled Visas and MasterCards that can be used to charge phone calls.

Citibank, the largest issuer of credit cards in the United States, challenged AT&T;’s new credit card Tuesday with one that enables users to charge telephone calls to AT&T; rival MCI.

MCI Communications Corp. is Citibank’s partner in the service, which allows the bank’s 14.6 million Visa cardholders to make calls in the United States and 170 foreign countries. MCI is the second-largest long-distance service behind American Telephone & Telegraph Co.

AT&T; began offering Visas and MasterCards in March to its 70 million long-distance subscribers who pass credit checks. It marked a huge non-bank encroachment into a competitive industry that has been very profitable for banks.

Richard Srednicki, Citibank’s business manager for Visa and MasterCard, said the company began notifying Visa customers about the service this month. MasterCard holders will be eligible later this summer, he said.

Srednicki declined to say how many customers Citibank expects to sign up. But he said, “The response rate so far is surprisingly high, and we’ve only had it out for the last two weeks.”

Citibank’s offer is part of a service called VisaPhone that Visa is testing for banks, said Visa spokesman Gregory Holmes. There are 124 million Visa cards in the United States.

“It’s another example of how we’re trying to open new markets where bank cards are not being used to charge purchases,” he said. He said 150 banks have expressed interest in the service, but he didn’t know which besides Citibank are already involved.

Spencer Nilson, publisher of an industry newsletter called the Nilson Report, welcomed what he said was a long overdue move by Citibank, the nation’s leading commercial bank.

“We’ve been saying that AT&T; should get into the credit card business and that the credit card companies should start offering long-distance service,” Nilson said. “But I don’t think (Citibank) would have done it if it hadn’t been for AT&T.;”

Since its introduction, the AT&T; Universal Card has attracted just over 1 million customers, said AT&T; spokesman Bruce Reid.

“I don’t think we’re going to react immediately to something like (the Citibank card.) We’re concentrating on trying to get a new product out on the market right now,” he said.

Nilson said he doesn’t expect Citibank’s new service to interfere with AT&T;’s expansion into the $423-billion credit card market. But he said Citibank can expect to find willing customers.

A recent study by Nilson’s newsletter predicted that, within two years, 14% of the 200 million Visa cards and MasterCards in circulation will double as phone charge cards.

In December, US Sprint, the No. 3 long-distance company, began issuing a Visa Card that also acts as a phone charge card.

“There’s virtually no room for expansion in the number of people (carrying credit cards), but there is room for expansion in the number of cards people carry,” Nilson said. “The history of the credit card market is that people are inclined to carry new cards that offer different services.”

American Express began offering similar service with MCI in the early 1980s, said spokeswoman Nancy Muller.

“We offer American Express card members who have MCI residential service the opportunity to consolidate their billing on their American Express card bill,” she said.