Plastic Profits : Finance: Culver City is expecting to generate revenue with its own credit card--an idea catching on nationwide.

Culver City is not known for being on the cutting edge, but it is attracting attention with a new revenue-raising idea--a city credit card.

The city will earn part of the interest Culver National Bank charges for credit card balances that customers carry from month to month.

The bank has set the interest at 16.95%. The city will receive 1.5% in the first year and 1.5% in following years.

Culver National will issue city Visa and MasterCards for a $20 annual fee and gold cards for $50 a year.

Culver City’s card, known as an affinity card, will not be the first of its kind, although the origin of the first card is not clear.

South Orange, N.J., is credited by many with issuing the first city card in December. But officials in Plano, Tex., say they were first with a card in 1993.

And the affinity card idea is catching on. San Francisco’s Board of Supervisors has approved the issuance of both a credit card and a phone card, and the city expects revenues of up to $7 million a year.

New York City may issue a credit card by the end of the year, said Bill Calabrese, president of the village of South Orange. Calabrese is working with New York officials to develop the card.

What is unique about Culver City’s proposal is that the city would earn a percentage of the debt carried by cardholders. Other cities take a percentage of customers’ credit card purchases--usually 1% or, in the case of San Francisco, 3%.

Culver City Councilman Albert Vera, who first proposed issuing the city card, said: “We have to start somewhere, and if we have to modify the card later, we can do that.”

The attraction of affinity cards is that they generate revenue with little if any cost to the city.

In Culver City, officials and bank executives declined to say how much revenue they expect to generate from the card.

Some council members doubt that the card will bring in much additional money. Said Councilman Mike Balkman: “It’s not going to be a situation where people will say they’ll choose their Culver City card over other ones.”

But Vera is optimistic that the cards will earn enough money to lower city taxes. He is lobbying his council colleagues to earmark any card revenues for that purpose.

Mayor Steve Gourley, however, believes the city should deposit the money in its general fund.

“I don’t think it’s a good idea to earmark anything for anything,” Gourley said. “As long as it goes to the city, that’s what is important.”

The bank will market the card, decorated with a picture of the new City Hall, to its roughly 4,000 customers, most of whom live in Culver City or within a three-mile radius.

The success of Culver City’s card depends on two things: the civic pride of the city’s residents and the credit card debt they carry.

Bank officials view the card as a way to gain new customers and build a stronger relationship with both its customers and the city.

“When Albert [Vera] contacted us a year ago, we weren’t sold on the idea. There could be fraud or charge-offs,” said Culver National President John Newhouse. “But then we decided it was a win-win situation. The city could earn money, and maybe we could get more business from it.”

In Plano, city officials have been able to funnel about $700 a month to local arts programs from its credit card revenues.

But South Orange has been the true success story. Since the village began marketing its card last year to its 17,000 residents, it has generated about $5,000 a month and expects to earn $100,000 by the end of this year, Calabrese said.

Now, Calabrese said, he is working out a deal with General Motors to offer discounts on car purchases made by South Orange cardholders. And he is negotiating with U.S. Watts, a long-distance telephone company, to let city credit cards be used as phone cards.

South Orange’s success has piqued the interest of municipalities nationwide, Calabrese said. He has been inundated with requests from cities asking for help in issuing an affinity card and from banks looking for customers.

Calabrese said the city card’s success so far is only the beginning. “By this time next year, no one will be carrying another card,” he predicted.