Ameritech Jumping Into Credit Card Fray

Ameritech on Thursday became the first--but probably not the last--of the Baby Bells to offer a credit card similar to a highly successful one marketed by its former parent, American Telephone & Telegraph.

The Ameritech card is a Mastercard and, as with AT&T;’s Universal card, it doubles as a telephone calling card. It is available to Ameritech’s 10 million residential customers in Indiana, Illinois, Michigan, Ohio and Wisconsin.

People who watch the credit card industry said it was certain that other regional Bell companies would follow with cards of their own. A Pacific Bell spokesman said that the company is studying a credit card but that no decision has been made.

But industry observers said the forces of competition made it inevitable. “Everyone I talk to says they (the regional Bells) are going to do it,” said Kurt Peters, an editor at the industry newsletter Credit Card News. “It is a matter of time.”

The arrival of telephone credit cards adds to the clutter of credit cards already available. According to Bankcard Holders of America, a Herndon, Va.-based consumer group, there are 6,000 bank cards, gas cards and charge cards vying for a spot in American consumers’ burgeoning wallets.

The telephone cards cause special concern to banks that offer Visa and Mastercard credit cards, because the calling-card feature is thought to give them an edge with consumers. Also, the telephone cards charge low annual fees, pressuring banks to reluctantly lower the fees that they regard as an important source of income.

After the success of AT&T;’s Universal card, the banks pressured San Francisco-based Visa to change its rules to make it virtually impossible for another telephone company to offer a Visa card. AT&T;’s card, the nation’s fifth largest with $3 billion in outstanding accounts, is offered as either a Visa and Mastercard because the rules were not retroactive.

Chicago-based Ameritech is emulating many of the features that made the AT&T; card popular with consumers. Ameritech offers no annual fee, an interest rate that drops as the card balance grows, an extended warranty for items purchased with the card and a 10% discount on most calls with the card.

Nonetheless, the card has already drawn an adverse reaction from Bankcard Holders of America. Geri Detweiler, a spokeswoman, said the 19.8% interest rate charged on small balances was too high. “We think people will do better with a fairly priced card,” she said.

Although Ameritech is enthusiastic about the card’s acceptance, credit card industry observers said it could not reasonably expect to duplicate the success of the much larger AT&T.; Ameritech’s timing was also questioned. Credit card delinquencies are rising, and consumers are showing increasing reluctance to take on new debt.

“The American appetite for cards is getting smaller. Consumers are realizing that credit card debt is expensive and not good for your financial health. They (Ameritech) must realize they may have a difficult time getting consumers to use it,” Detweiler said.