CREDIT CARD WARS (cont'd)
By - Kate Ballen

(FORTUNE Magazine) – Annual fees for credit cards seem to be doing a disappearing act. A year ago AT&T introduced its ''free for life'' card, which threatened the fee income collected by the 5,000 institutions that issue Visa or MasterCard. Now Sears Roebuck's new no-fee Prime Option Visa, coming this spring, could finish the job. Sears, owner of the fee-less Discover card, had to go to court to compete for the vigorish that consumers pay annually. It will total $36 billion in 1991. ''The magic word has become 'no-fee,' '' says industry consultant Robert McKinley, head of RAM Research. Some 400 banks now issue fee-less cards, vs. 300 last year. The second-largest Visa issuer, Chase Manhattan, is testing no- charge cards, while No. 1 Citicorp is standing pat. Citi needs the money. The next big threat to bank issuers is that Sears, AT&T, or American Express will further undercut them on interest rates. Although some banks charge less than 14% (see chart), the average interest paid is 18.8%, according to the Nilson Report, an industry newsletter. Consumers don't seem rate sensitive -- yet. Only 30% of bank card users pay in full each month. Meanwhile, credit card debt has reached $245 billion, its highest ever.

CHART: NOT AVAILABLE CREDIT: NO CREDIT CAPTION: PLASTIC: BIG GUYS VS. LITTLE GUYS