Losses at Cards

Ever since it went into the retail credit-card business in 1958, New York's Rockefeller-led Chase Manhattan Bank has lost money at it. Last week, tacitly admitting defeat, Chase Manhattan announced that it had arranged to sell off its Chase Manhattan Charge Plan (CMCP) for the value of uncollected customer accounts, now about $9,000,000. The purchaser: New York's newly organized Uni-Serv Corp. Uni-Serv's President Joseph P. Williams, has ideal background for his new job: until 1960 he was a top executive of the solidly profitable, million-member retail charge plan operated by California's Bank of America.

More than two-thirds of the bank charge plans started in the last ten years have failed. Typically, under these plans, the banks sign up both cardholders and merchants, send the cardholder a single monthly bill for all purchases under the plan, and take a commission from the retailers in return for handling the book keeping and collecting the bills. Chase began by sending out mass mailings of CMCP cards--and brought in a high proportion of poor credit risks. In still another costly bid for volume, Chase charged large retailers as little as 1 1/2% commission on charge sales, v. the average 5% charged by other bank plans. Yet the small stores among the 6,000 that Chase signed up did little to encourage use of the cards, and the big department stores offered their own credit plans. With many cardholders putting only a few dollars a month on the cuff, Chase did not even come close to meeting its expenses.

Bankers insist that the national, all-purpose credit-card clubs are having even more serious trouble, involving losses from deadbeat customers and chiseling proprietors. Nowadays, when a customer flashes his credit card, many restaurants and hotels that subscribe to the plan bill him directly, to avoid the 5%-7% commission charged by the clubs. The clubs have recently been forced to hike their annual membership fees to $8 (from $5 and $6) in an effort to make money on customers who charge less than $200 a year.

Hilton Hotels' Carte Blanche club, in serious financial trouble a year ago, anticipates that this year it will at best break even. The three-year-old American Express plan has yet to show a profit. Diners' Club, the granddaddy of the card clubs, watched profits from business with 1,200,000 cardholders slip 21% during the first half of the current fiscal year, under the pressure of increased competition and the recession. Disenchanted, after twelve years of catering exclusively to the credit demands of wining, dining and traveling Americans, Diners' Club last year bought an industrial finance company, is eying other credit-cardless operations.

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