Wells Fargo Card to Cut Mortgages : Credit: Charges will earn rebates that can be used to reduce points and fees. The move accentuates a trend.

Preparing for a major push into home lending, Wells Fargo Bank on Thursday brought out a new credit card allowing customers to earn rebates that can be used to lower mortgage costs.

The move accentuates a trend within the credit card industry, ignited last year by General Motors Corp., to entice customers with rebates on cars, clothes and other merchandise. The Wells Fargo card marks the first time a bank has offered a rebate on a mortgage, however.

Called the California Advantage card, it allows California customers to earn a 5% rebate on purchases, which can then be used to reduce the points or fees on a home mortgage.

The card is part of an effort by Wells Fargo to strengthen its position in home mortgage lending, where it ranks far behind its banking archrival, Bank of America.

“We have very large aspirations for the mortgage business,” said Jim Ketcham, Wells Fargo vice president for mortgage lending. “We are not a key player today, and we want to change that.”

Industry analysts said it will take more than a new credit card to boost Wells Fargo’s mortgage business. Last year in Southern California, it issued mortgages totaling $150 million, according to the market research firm Dataquick. Bank of America issued $1.8 billion in home mortgages in the region.

Wells Fargo “is just a blip on the radar screen,” said Campbell K. Chaney, a banking industry analyst with Sutro & Co. in San Francisco. “When you are trying to break into a business, you need a gimmick like this.”

The tactic could backfire, however, if Wells Fargo finds itself denying mortgages to credit card customers who have patiently earned their rebates.

Barbara Brady-Smith, Wells Fargo vice president for credit cards, said the bank intends to help cardholders manage their finances by including advice in billing envelopes and telephoning customers if they fall behind on payments. She said the bank hopes to provide a mortgage to every credit card customer who seeks one. “But we cannot guarantee it,” she said.

The rebate applicable to mortgage loan fees is capped at $700 a year and $3,500 for five years for standard card holders. Gold card holders may earn rebates of up to $1,000 a year and $5,000 for five years. The bank said points and fees on the average loan of $125,000 to $150,000 range between $3,000 and $4,500.

A standard card holder would have to charge $14,000 annually to earn the maximum rebate, more than six times the average amount charged on credit cards. However, Wells Fargo said it will allow certain family members--parents, grandparents and children--to transfer their rebates to a home buyer. The bank will also allow friends or unmarried couples to pool their rebates as long as they will be co-occupants of the house and co-borrowers on it.

No other card permits customers to pool their rebates, analysts said.

The interest rate on the California Advantage card, available as a Visa or Mastercard, is about a percentage point higher than what many Wells Fargo card holders now pay. The rate on the standard California Advantage card will be 16.9% with a $25 annual fee, and the rate on the gold card version will be 14.9% with a $50 annual fee.

As an inducement to take the card, Wells Fargo said, it is giving rebates to people who transfer balances from another credit card or from a department store card. A similar tactic was highly successful for two non-bank cards, American Telephone & Telegraph’s Universal card and the GM card.

Robert B. McKinley, publisher of the industry newsletter CardTrak, said the annual fee on the California Advantage card might be a stumbling block. He said General Electric recently eliminated an annual fee on its GE Rewards card, returning several million dollars to customers. He said the fee had slowed the growth of the card, which offers customers rebates on merchandise ranging from clothing to toys.

On the other hand, McKinley said, the Wells Fargo rebate sounds generous, and the card might appeal to someone saving to buy a home. “Certainly, for the right consumer who can qualify for a mortgage, it could be a good deal,” he said.